Refinancing bank requires joint loan for IP with one owner

Discussion in 'Property Finance' started by Ellie87, 31st Oct, 2018.

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  1. Ellie87

    Ellie87 New Member

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    Hi
    We are looking to refinance our PPOR and my husband's IP with an online bank for a cheaper rate (3.59% and 4.44% versus what we are currently paying with big 4 being 3.88% and 4.94%). However the bank has put the investment loan application in both our names for serviceability. The title is in my husband's name. Would he claim 100% or 50% interest on the new loan? ATO indicated 50% only? Not sure if relevant but IP was previously our joint PPOR. We didn't originally intend for it to be investment. We did a spousal transfer awhile back of my half to my husband.
     
  2. Ellie87

    Ellie87 New Member

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    I forgot to mention the current IP is in husbands name only, current and new PPOR loan in joint names as per title of PPOR.
     
  3. Rolf Latham

    Rolf Latham Inciteful (sic) Staff Member Business Plus Member

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    borrower of convenience

    not unusual for the thing to fly

    usually, but not always, dedns flow to the title holder

    get specific advice pls

    ta

    rolf
     
  4. tobe

    tobe Well-Known Member

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    I am tempted to make a comment about approaching an online accountant to ask this question but I’ll refrain.

    It’s odd the ATO gave you that advice. My understanding is it’s the original purpose of the loan that determines eligibility for taxe purposes.

    But I’m not an accountant.
     
  5. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    how or where did the ATO indicate 50%?

    Did he buy your share of the house for market value and did he borrow to pay you out?
     
  6. Jamie Moore

    Jamie Moore MORTGAGE BROKER - AUSTRALIA WIDE Business Member

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    I’m not an accountant so pls seek pro advice.

    It’s not uncommon for a husband and wife to be on the application for servicing but only one owns the property (and claims the associated income/costs from the property).

    Your situation seems a little more complex than that though given the spousal transfer.

    Cheers

    Jamie
     
  7. Ellie87

    Ellie87 New Member

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    Thank you for your replies.
    Yes it was valued at time of spousal transfer. He took out a new loan for the investment property in his name with the same bank with our PPOR loan, we did the transfer when we bought our new PPOR. So he bought it at market value, but the investment loan not as high as it could have been due to originally owning in two names and we had been paying off principal. I rang the ATO and asked someone directly after being directed to the department which gives tax advice on rental properties. I simply asked about one name on title with two on loan, I was told if two on loan he can only claim 50% of the interest. However just thought I'd see if anyone has had done this themselves and had received different advice as I thought I had previously read otherwise.
     
  8. Peter_Tersteeg

    Peter_Tersteeg Finance broker and strategist Business Member

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    I've seen cases where one or the other might apply. There are cases where the names on the loan do influence who gets the deductions, but in most cases (I have seen this with a spousal transfer), the ownership dictates the deductions.

    I suspect that the ATO has simply gone down the most conservative path. You might miss out on a few deductions, but the ATO probably isn't going to fine you for paying too much tax...

    What I'd do is take the advice of your accountant who is in a better position to understand the specifics as they apply to you.
     
  9. Terry_w

    Terry_w Mortgage broker licenced 4 tax/legal advice Business Member

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    Did you get this purchase/sale done through a solicitor? It doesn't really sound good the way you have worded it. but this is a separate issue.

    If there are 2 on the loan and 1 on the title and they are spouses the ATO will generally allow the interest to be deductible in full to the owner.
    I have written a Tax tip on this with references to the ATO authority for this - see my signature.