Purchasing property in spouses name

We are looking to purchase a property in my wife's name however she will not meet the serviceability requirements on her own. Can we do this? And if so how do we go about making this happen?

 

Yes that's no problem, you buy in her name only but put both of you on the loan. Because you're married, it's perfectly acceptable.

 

Very common - as per Jess' advice.

Single name on title, two names on the loan. Deductibility still determined by the name on the title.

 

Thanks Jess. I thought it should be pretty straightforward

 

So in this situation, would only the wife be able to claim deductions with the interest on the loan?

 

Tax deductibility is determined by the names on the title, not the loan.

 

OK so wifey can claim 100% of interest relating to the loan.

 

Yes.

 

If she fails servicing and has low income and the IP is neg geared perhaps its the wrong way.

To clarify - Wife will claim 100% of the income and also all deductions if she is solely on title. Its not just the interest.

 

It's actually for a PPOR that will become an IP in the future, once positively geared.

I need to spread the land tax thresholds now that I'm close to maxing mine out.

 

You should probably have a loan agreement with you lending what you borrow to your wife - to be on the safe side. legally all you have to go on is one paragraph in TR 93/32 (paragraph 6).

What state is the property in? and have you consider some strategies such as spousal loans and spousal transfers?

BTW 'hanso' means 'short sleeves' in Japanese.

 

Does it get messy with two names on the loan? Or is the main thing the title name being single

 

Best to avoid if you can. 2 reasons:
1. hurts serviceability
2. asset protection - both go down if something goes wrong.

Another reason:
3. asset protection. If the non owner ends up bankrupt it can be attacked even though they don't own it. resulting trust and/or constructive trust.

 

Thanks Terry. Is that the same for husband and wife?

 

Short sleeves didn't know that. Obviously.

Property is in QLD, this is the first I have ever heard about spousal loans, is that something that the ATO happily excepts in this kind of situation? And how does it actually work?

 

Bob, not sure what you mean, but it doesn't matter whether husband and wife or defactor or 2 unrelated parties, the 3 things listed would apply in any case.

 

QLD will limit the strategies unless you are willing to pay duty.
For spousal loans see some of the tips that I have written:
Legal Tip 38: Spousal and Related Party Loans

Legal Tip 97: Spousal loans as an asset protection strategy


Tax Tip 24: Capitalising Interest and Non working spouses


Tax Tip 47: Spousal Loans as a Tax Strategy

 

This type of loans are very common amongst high income earners or partners of law/accounting firms, they will usually use this strategy for asset protection by buying the property under the spouse name but do it as a joint loan or guarantor to support the servicing.

It's pretty much a strategy that you will need to think about it thoroughly because there are tax implications, best to speak to your accountant or a financial planner.