I think i did the wrong thing.

Ok hey guys my wife and i purchased our first IP in April last year. She earns $64k a year and i earn $70k.
Tax time last year we split the IP 50/50 however not this year but next financial year we are hoping to have children so her hours will reduce.

What should i do?

Thanks

Ryan

 

About what? I'm an expert on the children part.

 

Changing the ownership structure of an existing IP can be costly in most states. What state is the IP in?

Just goes to show all the planning posts people talk about that everyone seems to gloss over - ie considering death, divorce, default, disablement, dilation

 

Buy a few more IPs especially while you both have jobs and no dependants.

 

Hi Ryan

It's not the end of the world - pretty sure her losses could just be carried forward if she's not generating an income (assuming the property is negatively geared) for a while (ask your accountant).

Cheers

Jamie

 

Hehe
But in all seriousness, please don't overextend/stretch yourselves to the point of stress. Please only do it if you can afford it. I suppose APRAs limits come into play here. Positively gear.

 

That's correct. She can carry forward any tax losses and use them up when (if) she returns to paid work again.

 

Tax loss is not the end of the world.
You buy property for capital growth not tax deductions, that is just a secondary benefit. May not be the optimum circumstance but I wouldn't sweat it too much.

 

Negatively geared properties do become positively geared sooner or later...

Tax losses can be carried forward but if your wife earns a little bit (but below the tax free threshold so as not to be paying any tax) the losses can be soaked up without any tax benefit.

As @D.T. asked, what state is the IP in?

 

If Sydney, no point in buying now. And assuming its negatively geared... I dont think rents will rise more than say inflation.

If its elsewhere, (not Darwin or Perth!) they may be ok.

 

Hey guys thanks for your replies and positive feedback.

My IP is in Qld.

Rookie error on my behalf lol

 

If your IP is in qld full duty will be payable tontransfer title to one name. Cgt applies tòo.

Even where it was a main residence full duty would apply.

 

The lender may not agree to a change of title and the loan would need to be resettled or refinanced too - You cant just change title. It may be effective to do nothing and to allow the tax loss to accumulate for wife. However still lodge returns based on 50/50 and retain a record of accumulating losses if that occurs as these will offset future income.

Losses must be used as early as possible and you cant choose not to use them. Unfortunately if she works a little casual / PT in a year and earns less than the tax free amount eg $18,200 the loss must be applied and it is effectively "lost" since that income was tax free anyhow. I recently did a return for a IP owner who racked up $35K of losses over several year and had forgotten them. She earned $60K and got a significant refund she didnt expect. (Refund of employer PAYG withholding)

 

So how does carrying forward her tax work?

Im not too worried it was just something i never had thought about involving our IP.

Were considering buying 1 more this year then planning on family.

Depending on how we go she will have 3-6 months off then return 3-4 days a week. Thats what we worked out to be able to live ok.

 

If she has a loss of $5k this year and earns $50k next year the loas will reduce her taxabke income to $45k