Not sure

Before thinking too much, consult your family law solicitor. If you buy her out before there is a judgement made against you for support and division of assets, then you may end up having to compensate your ex twice for the one property. ie buying her share now, and again later when you are judged to have $X in assets and splitting those between you, your ex and your kid.

@ Gords – It is difficult to give a straight answer with not much information.

You have to be careful, if you buy her out and then sell the house and buy a new one then you are looking at paying a lot of stamp duty and closing costs, which will negate any tax benefits you might have in buying a new property.

If you have paid off a lot of the property and it is positively geared then what tax benefits are you trying to achieve? Positively geared property don’t allow you to deduct much tax (except in the case of a lot of depreciation) and thus the tax advantages will be negligible.

In my opinion it is not wise to purchase a property based on the tax benefits. Just cos you save some tax doesn’t make something a good investment. Buy her out of the house if you deem it to be a good investment, if you don’t let it slide.

Plus (looking at the family/emotional side of things), it might be better to sell the house together, take half and then move on. My parents recently divorced and my dad was considering buying the house more our of emotional attachment than sound investment decision. If he kept the house it would have kept the bad memories of the split for everyone in the family and made it hard to move on with our lives. By selling the house it gave everyone in our family a fresh start. I know your boy is only 2, but selling might allow you and your wife to have a fresh start. There are plenty of good properties out there, so it might be worth selling this one for the emotional benefit and buying a new one. A symbol of letting go of the old and embracing the new.

Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click Away

ps. Buying her out and then selling the house seems silly. You still end up with half the profits (cos you had to buy her out). If you were going to do that you may as well just sell it and take half.

Hi Gords.

Is there any possibility she may be able/willing to buy you out? 

G

Also watch out for any CG implications. If you transfer an asset under a family court order you may inherit (or give) the CGT implications with it.

Yes, CGT on the sale may be avoided, but you will inherit her cost base so, in effect you could be paying her CGT bill too – laster on when you sell.

Just take it into account when dividing up things.