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  • Profile photo of markymarkomarkymarko
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    @markymarko
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    My solicitor is happy with the contract so I am just about to get the ball rollings. So my question to this forum is about ownership of the property and names on the IP loan.

    I am the wage earner and my wife is a professional Mum (no income) some years she gets a small part time job with low income. We have 2 kids. The property is new will have good depreciation tax advantages and has NRAS incentive as well. With depreciation it works out to be CF + (just)

    I plan to have the property for at least 10 yrs or until retirement.

    To get full tax advantages and have a good exit strategy in regards to CGT, what name should I have the property under and what name should I have the IP loan under? I am guessing the property can be under both and the IP loan under mine so I can claim max tax benefits. Is this correct?

    Thanks for your help

    Profile photo of Dan42Dan42
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    @dan42
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    markymarko wrote:
    To get full tax advantages and have a good exit strategy in regards to CGT, what name should I have the property under and what name should I have the IP loan under? I am guessing the property can be under both and the IP loan under mine so I can claim max tax benefits. Is this correct?

    Thanks for your help

    Unfortunately that is not correct. If you buy the property as joint tenants, you will each have a 50% share of the property. Therefore, you will be each entitled to 50% of the income and 50% of the expenses. The interest on the loan is deductible dependent on the purpose of the loan, so the ownership in the property determines the percentage of deductibility, not the names on the loan.

    You could buy the property as tenants in common, and this would allow you to, say own 75% and your wife 25%. (Or 90 / 10, or 80 / 20 etc) The income and expenses are then apportioned along those ownership lines.

    Profile photo of Jamie MooreJamie Moore
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    Dan's right in regards to the tenants in common. 

    As for who's name it should be in. In general terms (and I'm not an accountant) if the IP is CF+ then it's best for the majority to be owned by the low income earner. If the property is CF- then it's best to have the majority owned by the high income earner (because it will reduce their taxable income).

    Cheers

    Jamie

    Jamie Moore | Pass Go Home Loans Pty Ltd
    http://www.passgo.com.au
    Email Me | Phone Me

    Mortgage Broker assisting clients Australia wide Email: [email protected]

    Profile photo of CatalystCatalyst
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    When you say it's CF+ you mean AFTER tax benefits right? What Jamie mentioned would be applicable if it were CF+ in it's own right (not after tax benefits).

     As mentioned it's who owns the property not who has the loan, that determines tax allocation.

    SO if it's in your wife's name you will not get those benefits.

    Put it in your name so you get the full tax right offs. The negative is if you sell it before you retire as the CGT will go on your income. But if you plan to keep it until you retire that won't matter. Although 10 years is a long way off, things may change. To hedge your bets you could have it in a bigger % for you and smaller for your wife.

    Profile photo of markymarkomarkymarko
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    @markymarko
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    Thank you guys, that's a great help. Catalyst, yes that right it's CF+ only if I factor in Tax benefits.

    Profile photo of ritiriti
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    @riti
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    Could you please advise me  For e.g at the time of purchasing  the property if 75% on husband name( High Income earner) and 25 % on wife name. So these % an I change later on ? and did it is going to cost ?

    Profile photo of markymarkomarkymarko
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    @markymarko
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    I am putting the property under my name for the above reasons, thanks guy's! So, is there any future pros or cons to putting the loan under both me and my wife's name, my name or just her name???? I want to safely expand my portfolio as quickly as possible and I want the loan structure correct in the beginning so there no headaches latter on down the track.

    Cheers

    Profile photo of omegapartnersomegapartners
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    riti

    if looking at changing ownership interests then a unit trust may be a more effective structure. The advantage of a unit trust over individual holdings is that the stamp duty on transfer is not at ad valoreum rates (unless the land rich tax provisions apply) and so you could end up saving a significant amount in stamp duty on transfer.

    Profile photo of markymarkomarkymarko
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    @markymarko
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    Thanks Omega

    Can you negitively gear within the trust? How would it work with claiming depreciation and interest as the property is brand new and tax claims contribute significantly @ 38cents in the dollar which is my marginal rate.

    Profile photo of omegapartnersomegapartners
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    Yes you can negatively gear with a unit trust. The trust will not be negatively geared but rather the gearing occurs at the unit holder level. The depreciation benefits will be at the trust level as it will hold the property and the interest deductions will be at the unit holding level. The loan will be taken out to purchase units in the unit trust.

    For example (these are just examples not related to anything but to illustrate the concept)

    Unit Trust

    Rent $30k
    Depreciation $10k
    Other Expenses $5k

    Net Rent $15k

    Unit Holder

    Net Rent $15k
    Interest on Loan $20k
    Loss $5k claimed on individual’s tax return

    I think Richard from Queensland deals with these structures quite often so hopefully he will reply re current market for obtaining loans for this type of structure.

    Profile photo of markymarkomarkymarko
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    Around how much would it cost to set up a unit trust?

    Profile photo of omegapartnersomegapartners
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    @omegapartners
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    Marky

    We charge $990 (including GST) for a land tax unit trust if the property is located in NSW. Be careful of the online ones as our provider has found some fundamental errors in many of them including some unit trusts which had merger issues (eeek !!) and one which claimed to be able to obtain the NSW land tax exemption and failed.

    Let me know if we can help. You will need a trustee. Would generally recommend a company as trustee. We can set this up for $990 including GST or you can set that up yourself online if you know what you are doing which is always cheaper.

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