Rather than jointly buying investment properties there are many benefits to the buying of properties in single names. Spouses can take turns buying to even things up a bit, but there are several benefits such as Spousal Transfers In same states spouses can transfer title with no stamp duty payable. This means Spouse A can sell to Spouse B and release equity doing so. Those funds can be used to pay down the non deductible home loan debt with Spouse B borrowing to acquire the property and deducting the interest. CGT may still be payable, but this can be reduced. Spousal Loans Spouse A can lender Spouse B money to buy the property. Market interest rates can be charged and this can enable a greater deduction to the higher income spouse with lower or even no income tax to the other. Tax arbitrage. Careful planning is needed as is good advice. CGT can be Minimised Where a property is owned jointly and it is sold both owners will be hit with a CGT event. Where there is one property owned separately by each spouse CGT can be timed by decided which property to sell. Death If one dies they can leave their property to the other one via a testamentary discretionary trust. Great asset protection as well as a double whammy of tax benefits with all the usual benefits of a discretionary trust plus the children being taxed as adults from the income. Increased Asset Protection With joint loans each borrower is liable for the whole debt. So if something bad happens both spouses could end up bankrupt and all properties owned lost. With separately owned properties if each only had the owner on the loan then if things went back on of the spouses may go down with the other untouched. Only half the family assets may be lost. Increased serviceability With jointly owned property both spouses must go on the loan or guarantee the loan. This means each is liable for the whole debt. But each is only legally entitled to half the income, or the income of their share. So if one of the spouses were to go out on their own to buy one property then they would be severely restricted because of the huge income. Each going their own way Sometimes on spouse is more aggressive than the other – sometimes in the area of investing. Going separately means the risk adverse spouse can be more conservative. Things can be structured so that the spouse with the least assets can do that risky development too – if it fails there is less to lose. Family Law Should the couple decide to split it will be easier to divide things up. It will be also more straight forward in working out contributions, or who paid for what. Land Tax Purchasing jointly in some states, such as NSW, will mean you only get one land tax threshold between you. Buying in separate names means you get one each. Disadvantages There are some disadvantages such as loss of control. Where B owns a property without A’s involvement then B could deal with that property without A’s knowledge or permission. B could - Sell - Rent - Leave the property to a third party at death - Mortgage - Further borrow against the property without A’s knowledge. B could get a LOC and gamble it away and then die and leave the property to Uncle Harry at death, for example. However not contributing to the property may mean there is no caveatable interest for the non-owner. Otherwise the non-owner could lodge a caveat. Combining some of these Planning ahead a husband and wife team start off by buying properties alternately in each name. The wife owns the main residence and 2 investment properties and the husband owns 3 rental properties. Each just stay under the land tax threshold in NSW. The wife may be off work on maternity leave and one property in her name could be sold with lower tax resulting. If things are timed well she could even prepay the interest on the 2nd property to bring her income down further. Once one investment property is sold the wife uses that to pay off part of the owner occupied home loan. She had already split this into several splits at the start and realises she can use the splits to invest without contaminating the remaining loan. These loans have redraw so she can start a debt recycling strategy even though she may no longer qualify for new borrowings – the redraw funds can be taken out again. The first thing she does is to lend the husband money under a commercial loan agreement at a market interest rate. The loan is unsecured so she charges her husband 12%. The income she receives is not taxable, or may be taxable depending on how much the CG was but her tax rate is still lower than her husband’s top rate of 47%. Extra income from the interest is used to pay off her non deductible loan. She also takes this opportunity to borrow to pay the interest on her other investment property. She does not have enough funds to do this otherwise. The husband gets to claim the interest he pays the wife as a tax deduction because he has borrow the money to pay for investment expenses. This leaves him with more tax savings. Before doing all this she has sought legal and taxation advice from their lawyer. much later... Later, after 20 years, or so the wife dies… leaving her main residence to the trustee of a discretionary trust which the husband controls. She debated about making the trust optional in her will, but decided against it in case her husband remarried again. This is exactly what he did, marrying a girl half his age. But the terms of the will trust specifically excluded any new spouse from every receiving benefits from either income or capital from the trust. The trust also contained a life tenancy for the husband and this allowed the trust owned main residence to be exempt from land tax in NSW. Not long after remarrying the husband died of a heart attack during a love making session. The terms of the trust allow the children to take full control of the trust and the property kicking out their father’s new wife.