Taxes on rent under joint name.

Thanks everyone !

 

Better run this past your accountant before acting. You may be up for stamp duty and CGT as any transaction will be levied at current market value.
Marg

 

I felt a bit like Dorothy for a while there. I didn't know where the hell I was.

 

Will back up Terry on his thoughts.

You need to work out if you are tenants in common or joint tenants and then the relevant ownership split. If it's 50/50 then the tenants in common/joint tenants part is irrelevant, if it's joint tenants then it is automatically a 50/50 split. You can find this out with a title search if you're uncertain.

The rental income/expenses should be recorded in the tax returns using the ownership percentage worked out above. There is no getting around this unless there is a far more complicated ownership structure than indicated.

If you decide to transfer to another person be aware that you'll more than likely be liable for stamp duty and will absolutely be liable for CGT (as will the other owners). This will be assessed using market values if you do not conduct the transaction at arms length.

This is a textbook scenario of why you should always seek professional advice prior to entering into a transaction, especially if it's anything but the absolute most basic transaction.

 

And the stamp duty and CGT could have been avoided if advice had been sought.

 

Thanks @Terry_w, @wogitalia

call it youthful ignorance. This was done many years ago, before we knew any better. Looks like pointless to change the name. We might as well wait until property is sold to avoid paying CGT.

 

The main reason to change names would be if there is a very significant difference in taxable incomes that holding it for a sustained period will cost more in the tax payable on that rental income than it would to dispose of it.

There could be other situations such as if your husband's income is going to increase significantly in that period (so CG would be in a higher bracket than doing it now), the sister will have no income (pregnancy for example) to time the sale or other situations where it would be beneficial long term for the CG event to be in the sisters name ultimately.

It's probably still at least worth asking your accountant with the specifics, generally it wouldn't make sense to cop the stamp duty/CGT now but there are certainly scenarios where it might make sense.

 

Ok hadn't thought of that.

Certainly makes a lot of sense when you put it that way.

Many Thanks

 

And consider that you are not really paying more CGT by transferring title now, you are just bringing the tax forward. In fact the tax may be less in the long run if the new owner is an owner occupier or a resident. But stamp duty is a serious issue to consider.

 

Um, better check this out.

The owners will be liable for CGT when the asset is disposed of.

Marg

 

Thanks Marg, I will check this out with my accountant.

 

Many families create this sort of mess, usually old timers have own idea on how things work, but today, you will get caught out.

I suggest no family member has name on anything unless getting the benefit directly, no delayed benefits......which often are actually liabilities !

 

Yes it is pretty common. I had a client who went on the main residence loan and title with mum because dad was overseas at the time. Costly mistake as the property was then subject to CGT.

and the opposite. Another client went on title to son's main reisdence so he could qualify for the loan. Mum was 50% owner so 50% of the property was subject to CGT.

 

Tip : NEVER put a property in any name other than the name of the true buyer without paid legal advice

 

Yes, never again. Still trying to sort this out.