Couple, 3 houses each, going down to single income - best tax strategy?

Discussion in 'Accounting & Tax' started by AyJay, 22nd Mar, 2021.

Join Australia's most dynamic and respected property investment community
Tags:
  1. AyJay

    AyJay Member

    Joined:
    27th Aug, 2019
    Posts:
    23
    Location:
    Perth
    Hi all

    My partner and myself have 3 investment property's each, we are not yet married, but due to age we plan on starting a family soon enough.

    When this occurs my partner will stop working and we will go down to one income.

    As mentions she owns 3 investments and I own 3.

    Does anyone have any suggestions how we can legally reduce are tax within the single income, at the moment I think because she owns the 3 houses (not me) I can only claim a deduction against my own property's etc. Meanwhile, when she's not working, but has 3 rental property's she won't have any income to offset the investments etc.

    Any advise? Sorry I'm probably not wording this question correctly but hopefully someone understands what I'm getting at.

    Thanks
     
  2. thatbum

    thatbum Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,788
    Location:
    Perth, WA
    Buy her some shares?
     
  3. Beano

    Beano Well-Known Member

    Joined:
    7th Apr, 2016
    Posts:
    3,345
    Location:
    Brisbane
    Congratulations on your investments
    Would the three investment property profit push her into the top income bracket ?

    To increase her income (if below the top tax scale , I assume you are in the top scale with your properties?) perhaps she could charge you a management fee to manage your properties
     
  4. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    27,095
    Location:
    Sydney or NSW or Australia
    @AyJay - Not unless she holds a real estate licence.

    I assume that if she is not working, then her taxable income will be lower & combined incomes will be lower. Are her properties negatively geared?

    Have you had depreciation schedules prepared for all properties?
     
    qak likes this.
  5. Firefly99

    Firefly99 Well-Known Member

    Joined:
    24th Jul, 2020
    Posts:
    1,727
    Location:
    Qld
    If you have any cash offsetting any of your loans then move it to an offset attached to one of her loans. Not sure what else you can do.
     
  6. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Member

    Joined:
    18th Jun, 2015
    Posts:
    41,667
    Location:
    Australia wide
    Not much she can do. You can't divert your income to her without triggering cgt and duty. Any shares in her name or a trust? Are her properties positive gear d?
     
  7. Paul@PAS

    Paul@PAS Tax, Accounting + SMSF + All things Property Tax Business Plus Member

    Joined:
    18th Jun, 2015
    Posts:
    23,319
    Location:
    Sydney
    It depends if the property is +ve or -ve geared. If it is a net rental loss when she is not working she may accumulate a tax loss and in a future year enjoy a tax free holiday when she returns to work. The trap to low income of course is it dissolves the value of the rental loss if her marginal tax rate is low (as low as 0%) Sometimes there can be strategies around changing ownership PRIOR to ceasing work but thats largely NSW only etc and some tax advice would be wise. It also is a time to review whether retaining all is wise. Selling while not working could reduce tax on a CGT gain and allow a rejig of finances but may impact benefits if they are available.
     
  8. AyJay

    AyJay Member

    Joined:
    27th Aug, 2019
    Posts:
    23
    Location:
    Perth
    Hi guys, thanks for the advise and sorry for the late reply been abit busy. All property's were negatively geared, pre covid, however now with loan interest reductions and rental increases I believe they will be neutral to slightly positive. Need to calculate this and will soon however.
     
  9. AyJay

    AyJay Member

    Joined:
    27th Aug, 2019
    Posts:
    23
    Location:
    Perth
    There is an under performer in Perth she may like to sell in the next year or so, therefore will keep that in mind!



     
  10. AyJay

    AyJay Member

    Joined:
    27th Aug, 2019
    Posts:
    23
    Location:
    Perth
    Hi, yes most property's except a 1970s boutique apartment in Carnegie, Melbourne, however when carrying out recent capital works, my accountant created a schedule for theses items.