Hi all My girlfriend (de facto) and I just signed a contract to purchase our first property together. It will be our PPOR. We're both employed and making similar money at the moment, but it's likely that I'll be making substantially more in the future. I'm inclined to think that it's probably best for us to just have her on the title for asset protection reasons in the future, as I'm likely to become a principal/director of a legal firm in the next few years (tax/property isn't my area of expertise obviously!). Other than asset protection and issues relating to borrowing capacity, is there anything else we need to consider in making this decision? I've read TerryW's post on the downside of 99/1 ownership, and I've got no concerns about her dealing with the property without me. It is possible that we might want to use it as an investment property in the future though, maybe in 5-10 years time.
If it might be a ip later, the deductions will be split based on ownership as well. Might it be an idea to ask the partners how they do it?
This is really a legal question. By signing a contract in both names you have entered the transaction exposing yourself. there are asset protection and stamp duty consequences to changing the settlement persons. Who paid the deposit and what was its source? Can girlfriend get a loan on her own? Anyone likely to challenge her will etc. I don't know the Tas duties laws off the top of my head, but can u transfer for full consideration and avoid duty?
Thanks, I have and the partners have a range of structures they've used (99/1, 100/0, joint tenancy). Yes, there's an exemption for sale or transfer of PPOR to JT or TIC in equal shares to a spouse or other in a significant relationship (s55 Duties Act). There's also an exemption in s49 for a transfer where there's no change of beneficial ownership. Thanks Terry_w, I'll talk to the solicitor who's handling the purchase for us about it. The girlfriend wouldn't have been able to get a loan on her own. No concerns about will etc. She's largely paying the deposit.
You then have to worry about the resulting or constructive trust argument. Even though it is in her name, it could be your asset in full or part... but that doesn't mean it not worth doing.
Yup, I understand that. Even if there's no 'real' asset protection by changing the nominal ownership structure it at least creates an extra hoop for any potential creditors or the ATO to jump through (although obviously hopefully this will never be an issue). When you say 'that doesn't mean it's not worth doing' - are you referring to having ownership just in her name? Assuming there's no 'real' difference in asset protection regardless of the structure we choose - it seems to me that if she's most likely to be the lower income earner it would still be sensible for us to put it solely in her name (subject to any stamp duty consequences) so if in future we use it as an investment property the income is streamed to her (although I imagine that if the ATO got really keen there would still be issues in this arising from a possible resulting trust). Thanks for your comments so far, I'm trying to pinpoint any considerations that we need to give thought to / take advice on.
Yes, and if you decide to move out and rent it you could buy 50% from her and borrow to do so and claim the interest interest once it was rented out. But if it was 99/1% the extra interest wouldn't be deductible. Strategy: 50% Spousal Transfer Strategy to Increase Deductions Strategy: 50% Spousal Transfer Strategy to Increase Deductions Don't forget the need for a will for her and a carefully though out estate plan if something were to happen
Thanks, but wouldn't that also mean that I need to declare 50% of the income from the rent? So if my income is much higher than hers we might be better off just leaving it all in her name? That would definitely be an option we might look at if we were on similar incomes though.
The assumption is that if you finance the whole purchase of the 50% it will probably have a net tax loss.
Yes could be better to leave as is, you would have to reconsider that at the time. But at least it gives you options.
