Hi All, New to the Forum and new to Investment Property.
Have just Bought my first investment property, or should I say settlement is a while away yet.
But I believe I have stuffed up monumentily already.
My situation is that we are a single income family and from what I believe to be the case now, I should not have put the property in my wifes name as well as mine.
Is this so ? Will this have implications as far as the split of the allowable deductions against my income?Any advice would be appreciated!
bomis
I guess you are the income earner !
If contract has just been signed then see your solicitor quickly and advise him of your error, maybe your solicitor can get it fixed before it goes too far.
Otherwise, you could look at it from another angle, any CGT is split when you sell, if your partner gets a job later then allowances can then be split etc. You can buy shares in your partners name and offset dividends against deductions of rental.
There is always a positive to the negetive in the long run.Only the owner can claim deductions. If your wife is not on title, then she cannot claim. In this sort of climate then negative gearing effects would be small so you won't be saving too much tax by just having the property in the highest income earners name. But there could be big CGT savings later on if half the CG could go to the non-working spouse.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Bomis, I believe that to be true. You own 50% so you can claim only 50% of deductions. The other half will need to be claimed by your wife and without an income will not be relevant i guess. We went through the same thing but are using a trust now as I have setup a business as well.
Bomis, just to give you some perspective, I've run a few numbers through my simulator. As Terry says, negative gearing isn't that negative now interest rates have come down so much, and it's nowhere near as critical to keep the property in the higher income earner's name.
Say you purchase a 400k property that you're getting 400/w rent, ie 5.2% gross yield:At $0 income, it will cost you $125/week in the first year, and will be net positive after 9 years, paying you $17/w (assuming 5% increase in rent pa).
At 60k income, it will cost you about $34/w in the first year, and will be $54/w positive after 9 years.In the long run you'll probably pay a lot less tax for your wife's rental income and CGT if you sell, than the extra it's going to cost you in the first few years to have that half in your wife's name. Costs will be about half of each of those above for 50% ownership; I've simply plugged in the full amount for each wage. This all assumes interest rates will stay so low of course; it's a whole new ball game if they go back up to 9%.
I'd strongly suggest (assuming you're going to leave it in joint names) that you have two separate loan accounts. One will be designated as your half, and one as hers. You can then pour all excess funds into her loan (or her offset account), while leaving yours as IO, as the tax deductibility of her loan interest will be much less effective than yours will be. This may not be possible if your house is purchased as joint tenants rather than tenants in common. That's an interesting legal issue.
Cheers, S/C.
Hi Bomis
If the property is in joint names then you can only claim 50% of the deductions.
However, you may still be able to rectify the situation. In several states, providing you have put the purchaser as (your name) and/or nominee, then you can still elect to have the name of the owner changed to your name only.
If the purchase is subject to finance then you could always try the argument that finance is not secured because your wife is not earning any money/enough money and that you need to change the name of the purchaser to your name only.
Alternatively, you could just ask the vendor if you can change the contract to reflect your name only. As long as your bank is aware of this and doesn't have a problem with the change in ownership name then it should all be OK. It is no skin off the vendor's nose. If I was the vendor, as long as the new contract was in place before the old contract was torn up and as long as the new contract was unconditional I wouldn't have any problem at all.
Just some options for you
Cheers
K
Thank you to all for your responses.
I have learn't a valuable lesson up front.
I have been taking some of the advice and am seeking to change this to Tennants in Common with 99% ownership in my name and 1% ownership in my wifes name..
Fingers Crossed.
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