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Purchasing property in spouses name

Discussion in 'Property Finance' started by Hanso, 15th Apr, 2016.

  1. Hanso

    Hanso Member

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    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?
     
  2. Jess Peletier

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    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.
     
  3. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Very common - as per Jess' advice.

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

    Hanso Member

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    Thanks Jess. I thought it should be pretty straightforward
     
  5. Tranquilo

    Tranquilo Well-Known Member Premium Member

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

    Corey Batt Finance Strategist Business Plus Member

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

    Tranquilo Well-Known Member Premium Member

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

    Jess Peletier Mortgage Broker - Australia Wide Business Member

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    Yes.
     
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  9. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

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    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.
     
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  10. Hanso

    Hanso Member

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    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.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    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.
     
  12. bob shovel

    bob shovel Well-Known Member

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

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    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.
     
  14. bob shovel

    bob shovel Well-Known Member

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

    Hanso Member

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    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?
     
  16. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    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.
     
  17. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    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
     
  18. sumterrence

    sumterrence Well-Known Member

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    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.