Tax Tip 31: Should I buy in my name because I earn more money and can claim more?

Discussion in 'Accounting & Tax' started by Terry_w, 28th Aug, 2015.

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  1. Terry_w

    Terry_w Lawyer, Tax Adviser and Mortgage broker in Sydney Business Plus Member

    9th Jun, 2006
    Australia wide
    Should I buy in my name because I earn more money and can claim more?

    These sorts of questions are very common. But a lawyer would be negligent to give a one word answer as the questioner is only asking about income tax issues and is only thinking the short term.

    Income tax - first thing to do is to work out the cash flow on the proposed purchase and to do this including non cash expenses such as depreciation, LMI etc. Work out how much tax savings would be expected and then compare this to buying in the other name. Consider the results for the first year and then for the next 20+ years. Rents tend to rise so any savings now may be negated in a few years when the property becomes cashflow positive and produces positive taxable income - maybe around the 10 year mark.

    Next consider what this extra cashflow could mean to you. Saving an extra $4000 in the first year or so could help pay off the home loan sooner, allow quicker debt recycling, allow more investments quicker etc. But it will result in more tax payable later so longer term it could be worse.

    CGT needs to be considered too. Many times I have seen a couple buy a property in the name of the higher income earner with the non working spouse owning nothing. Years later the property is sold and the owner is on the top rate of tax while the non owner spouse still has no income.

    And don’t forget about the other tax strategies
    • spousal loans
    • estate planning tax strategies
    • reducing land tax
    • spousal transfer strategies
    • offset account strategies

    And the non tax aspects
    • control
    • asset protection
    • death
    • estate planning
    • leverage ability
    • ability of getting finance
    • etc
  2. blackenator

    blackenator Well-Known Member

    18th Jun, 2015
    what an awesome post thanks so much for all your information Terry with all these tax tips they have been such a great help
    Terry_w likes this.
  3. Patamea

    Patamea Well-Known Member

    18th Jun, 2015
    Thanks again Terry for another great post
    Terry_w likes this.