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Buying into Wifes IP

Discussion in 'Property Finance' started by jordy, 14th Jul, 2016.

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  1. jordy

    jordy Active Member

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    Hi All,

    Before me and the wife got together she already had her own investment property.
    450K Value/$340K Balance IO $430 per week rent.

    My wife is currently on Maternity leave and looking to go back to work part time in 6 months time.

    My question is as I am the high income earner in the family what are the tax implications if I refinance half of her mortgage in my name? Obviously I am considering this to reduce my overall tax income.

    Thanks
     
  2. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Do you mean refinance the loan (not mortgage)?

    You won't be able to claim any interest at all. You would need to borrow to acquire her share to be able to claim some of the interest.
     
  3. jordy

    jordy Active Member

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    Sorry I meant refinance her loan into my name. Could this be possible if she sold half to me etx ?
     
  4. jordy

    jordy Active Member

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    I am guessing I would also need to pay stamps etc
     
  5. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    No.

    If you borrowed to buy her property it could be possible to claim the interest on your loan to buy out her share of the property.

    What state is the property in? If QLD stamp duty will apply on the market value. Also it would be a CGT event for your wife.
     
  6. Elives

    Elives Well-Known Member

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    isn't it a mortgage as it's secured against property?
     
  7. Greyghost

    Greyghost Well-Known Member

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    What is your reason for buying into the property?
    Is it net geared at present? - but for how much longer? If it is going to break even in the next 2 years then there will be a lifetime of positive gearing or net rental profits to be assessed on.

    How long is she planning to go on mat leave for?

    If she does go back to work i assume you will still be on a higher tax bracket than her?

    You are a high inc earner, in saying that wouldn't net rental profits be better off assessed under your wife?

    If your concern is ability to borrow, the property does not need to be in your name for you to buy an IP jointly.
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    there is the loan, and then there is the mortgage, different things. It is the borrowings that determine deductibility, not the mortgage.
     
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  9. Elives

    Elives Well-Known Member

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    i'm still confused, which is the loan and which is the mortgage? my understanding is that a mortgage is a loan that is secured against property
     
    Last edited: 15th Jul, 2016
  10. thatbum

    thatbum Well-Known Member

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    No technically a mortgage is the part where the property title is encumbered. It is a separate issue from the loan in this context.

    When the OP originally said "refinance the mortgage in my name", it doesn't quite make sense, but the word mortgage is better linked to the property title, rather than the loan liability.
     
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  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Many people use the word 'mortgage' when if fact they are talking about loans. The mortgage is the lien placed on the title to a property, and not the loan.

    So X owns the property. Y cannot give a mortgage as Y doesn't own it, but Y could borrow using the property owned by X as security (if they are spouses). In this case X would be the name on the mortgage and Y would be the name on the loan (X would need to give a guarantee).

    See
    Legal Tip 118: Loans and Mortgages are not the same thing!
     
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  12. Elives

    Elives Well-Known Member

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    Thanks for clearing that up Terry and thatbum makes sense now.

    Cheers,