Claiming interest for a property I don’t own

[joatmon]

My simple question is:
Can I claim the capitalised interest for a property owned by my spouse?

Background: I currently have 3 IPs (purchased in my name) and have my eye on a potentially neutral to +vely geared property (#4). As my wife currently works very hard for no pay (i.e. at home mum), we plan to buy the property in her name. At the moment an equity loan (secured against our PPOR) pays for all the 3 IP costs, including the interest on the other IP loans, and I claim all the interest (and capitalised interest) from the equity loan as a tax deduction. So far so good.
My plan is to take out a loan for IP#4 and have the interest on this loan also paid for by the equity loan. My wife can claim for the interest on the loan for IP#4 (e.g. $1000/month) that is paid by the equity loan, but can I claim the remaining interest on the equity loan which includes her capitalised interest? Or do I have to calculate her proportion of capitalised interest from the equity loan!!
Does this make sense??

Is there a simpler way??
I've been pondering this for a while and can't see the answer at the moment.

joatmon

 

[RumpledElf]

If your name isn't on the title - no.

Be very careful with putting things in her name if she has low or zero income and you're setting her up with a negatively geared asset. The negative income becomes positive for family tax allowance and she could end up doubly behind, with a loss and a FTA debt to boot. There was a HUGE thread about that a few months ago.

 

[joatmon]

Be very careful with putting things in her name if she has low or zero income and you're setting her up with a negatively geared asset. The negative income becomes positive for family tax allowance and she could end up doubly behind, with a loss and a FTA debt to boot. There was a HUGE thread about that a few months ago.

Thanks RumpleElf
As I expect the property to be positively geared, we are putting it in the name of the lowest income earner. We don't want to set up a trust at this point, so sharing the ownership of the properties should provide some asset protection (if only some).

joatmon

 

[Terryw]

I would say you probably can.

You would enter into an agreement with the spouse and she would lend you the money, you pay her the same interest as she is charged so her net gain is nil, and you get to claim the interest. if it capitalises you could be able to claim the interest on interest too.

The wife may even be able to charge you a higher rate if you are providing no security. This will help divert some income to her.

Speak to a good accountant.

 

[dr.jauncey]

Hi, if that equity loan is in your name then the portion used for capitalising interest would effectively be loaned to her. Then she will claim her share of interest to you, you will declare that interest as income and claim the same interest as an expense.

Each deposit and withdrawal to and from the equity loan will change the portion used for each purpose. That will get messy very quickly.