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Best ownership percentage to maximise tax benefits

Discussion in 'The Buying & Selling Process' started by HouseData, 8th Nov, 2015.

  1. HouseData

    HouseData Member

    Joined:
    12th Oct, 2015
    Posts:
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    Location:
    Sydney
    Hi everyone,

    I would like to ask advice for the best ownership structure for my purchase.

    My partner earns around $40K a year more than me. At first, we thought we would structure it as joint tenants 50:50. But after visiting the figures for negative gearing, I thought it may be better, if we change it to tenants in common at a split like 65:35.

    The property will be a loss around 35K to 70K depending on the interest rate (4.5% to 7%) . The home loan is with both names.

    Does anyone know if we still can keep the structure as joint tenants and still have a percentage different than 50:50 such as 65:35 as I wanted? The benefits of this is the ownership will automatically transfer to the other person if something happens to one.

    What would you recommend as the best structure for us to maximise tax benefits?

    thanks
     
    Tekoz likes this.
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
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    8,942
    Location:
    Sydney
    joint tenants is treated as tenants in common 50/50 for tax purposes so you would claim half each.

    Which structure you implement will depend on your situation and long term objectives. What is good today may not be good next year. Don't forget rents increase and properties appreciate.

    I think investors should generally avoid joint ownership altogether. But if you only intend to purchase one property it might be ok.

    See
    Legal Tip 68: Avoid 99%/1% ownership of property Legal Tip 68: Avoid 99%/1% ownership of property

    If you do go with one owner then try to avoid having both of the loans.
     
  3. HouseData

    HouseData Member

    Joined:
    12th Oct, 2015
    Posts:
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    Location:
    Sydney
    Thanks Terry.
    In my case, we both plan to continue working for a long time. So no one will be in the low income bracket. As we paid quite a high price for the property, we don't see we will run into positive cashflow any time soon, at least for another 7-8 years.

    Do you still see the benefits of having one owner on the title for us?

    Also, if we have listed both names on the front page of the contract already, can we still change to one name now before the settlement?

    I have read your thread about "Avoid 99%/1% ownership", just want to clarify one thing, if 1 owner is on the title, 2 names on the loan, can the non-owner partner still claim the tax deductions on the loan interest?

    thanks a lot for your information.
     
    Tekoz likes this.
  4. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
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    Location:
    Sydney
    If you intend to buy a few properties it may be better to segregate ownership. It is not only interest and other deductions to consider but other strategies become possible such as spousal loans and spousal transfer strategies. These can help you pay off the non deductible home loan sooner.

    For interest - the person on title claims regardless of what is on the loan.

    Tax Tip 79: Interest Deductibility for 1 on title 2 on loans Tax Tip 79: Interest Deductibility for 1 on title 2 on loans