How to structure ownership of first IP for tax savings

[hc_andy]

My wife and I are in the process of buying our first investment property. I'm looking for information on how to best structure our purchase to get the best tax savings and was wondering if we should buy it in both names (50/50 ownership), or give one person a higher ownership (70/30), or maybe look at a family trust or do something else. I'm the sole provider and my wife work part time and makes 1/3 of what I make.

Thanks.

Andy

 

[Propertunity]

My wife and I are in the process of buying our first investment property.

Congratulations Andy

I'm looking for information on how to best structure our purchase to get the best tax savings and was wondering if we should buy it in both names (50/50 ownership), or give one person a higher ownership (70/30),...

If it is just tax savings you are after normally you'd put the property in the name of the highest tax payer. However, bear in mind that eventually, over time, this property will go cash flow positive and then if the property has been put in the highest taxpayer's name, the cash produced gets taxed at the highest rate.

Then their is the issue of asset protection which is a whole 'nother discussion.

It really depends on your ultimate end goal Andy. If you plan on having 1 or 2 IPs then sure put 'em in your own names in %'s that work for your tax. If you drive a car or own tenanted property or are in a job where you can get sued then seriously consider using structures for asset protection.

If you want 5, 10 or 20 IPs, then you need to setup some structures - and it is much better to do that now than later. It will cost you a bunch of money but you need a lawyer and a tax accountant in the same room at the same time to do it properly. Trying to move properties out of personal names and into trusts later involes a lot of money in stamp duty and CGT etc.

Cheers,

 

[rugrat]

Second what Propertunity wrote. If you are really unsure go and see a financial advisor or accountant who specialised in property investment and get their opinion.