Joint Proprietors Vs. Tenants in Common

After buying our first IP recently we have to option of going with joint proprietors or tenants-in-common, i've bought the IP with my partner, we are not married but been living together for 5 or 6 years now. The loan is in both our names.

my question to all the experts is:

Which option should we go for? is there a good reason to go for joint prop or tenants-in-common?

from a tax point of view i earn circa 100K pa and she earns about 65K pa, from a tax point of view i dont see why we should not put the property down 50/50 from a tax point of view?? unless i've done my calcs incorrectly there is no big saving having it all in my name or 50/50 split between us both?

thanks for any comments
 
Which option should we go for? is there a good reason to go for joint prop or tenants-in-common?

I think people prefer tenants in common so that you can will away your ownership of the property to anyone you want. You can also nominate what fraction of a property each person owns.

If it's joint tenants, its automatically a 50/50 split and if someone dies, their partner automatically receives the remaining 50%.

Tenants in common is preferable because you can choose who will receive your fraction of the property when you die. If you are joint tenants, its possible that if you die and your partner remarries, your 50% of the property could go to your new partner and/or their children, and not your own children.

In your situation, id go 50/50 as tenants in common.
 
I can think of very few times I would do a joint tenancy over a tenants in common.

But it sounds like from your post that the question is really should we do a 50/50 split or have it all in your name. That depends on the actual loss incurred in running the property, do you want to invest in something together (or invest separately), how long do you plan to hold it for, asset protection risks, etc.
 
How about this scenario?

My wife earns around $60K and I earn $100K plus. My wife is likely to go 12 months leave - 6 months half-pay and another 6 months no pay. After that she will probably only return part-time for a while.

Should I buy IPs as "tenants in common" or as "joint tenants"? How do I split up the share at say 99% tax deductibility for me and 1% for my wife?
 
How about this scenario?

My wife earns around $60K and I earn $100K plus. My wife is likely to go 12 months leave - 6 months half-pay and another 6 months no pay. After that she will probably only return part-time for a while.

Should I buy IPs as "tenants in common" or as "joint tenants"? How do I split up the share at say 99% tax deductibility for me and 1% for my wife?

Lukey does the lender require both your incomes to secure the loan?

If not, I would purchase the property solely in your name.

If you do require both incomes and the bank/lender insists both names on the title I would opt for tenants in common split 99/1 in your favour.

Hope this helps.
 
Lukey does the lender require both your incomes to secure the loan?

If not, I would purchase the property solely in your name.

If you do require both incomes and the bank/lender insists both names on the title I would opt for tenants in common split 99/1 in your favour.

Hope this helps.

Thanks Rixter.

If for some reason through my lender I have to opt for Joint Tenants (which might be my current situation), what would happen to tax losses in a year where my partner would have an income of only say $15K and then in a year with no income? Can personal tax losses be carried forward a year or two? I would be expecting this property to be positively geared within a few years anyway.

Kind thanks

Luke
 
My understanding through consultation with my accountant is personal tax losses may be carried forward.

I would strongly suggest you run your situation past your professional tax consultant for clarification.
 
How about this scenario?

My wife earns around $60K and I earn $100K plus. My wife is likely to go 12 months leave - 6 months half-pay and another 6 months no pay. After that she will probably only return part-time for a while.

Should I buy IPs as "tenants in common" or as "joint tenants"? How do I split up the share at say 99% tax deductibility for me and 1% for my wife?

You cannot split up a joint tenancy holding in any way other than equal shares. If you want to own it in a 99/1 proportion, you must have it held as tenants in common. As for the tax benefits of such a split there's no way on a forum that anyone can answer that question without expected rental figures, expectations on paying the loan down, an idea of your future income flows, depreciation figures, how long you plan to hold the property for etc.

For example, if your wife didn't intend to go back to work again and you planned to sell in a year for a quick buck, put it in your wifes name as much as you can. If you planned to hold onto it long term, not pay off the loan unless you have to and get as much out of negative gearing as possible, buy it in your name as much as possible. But if its a positively geared old house from the 60s, you might be better off having in your wife's name.

It all comes down to weighing up the current negative gearing benefits versus the future capital gain. In 99% of cases with my clients, they go with negative gearing benefits.

Tax losses can be carried forward.

If your employer offers salary sacrificing, you can look at using Julia's salary packaging kit for rentals if your employer is up for it.
 
Mry,

In establishing a "tenants in common" 99% - 1% ratio, is it possible to apportion the interest on any loan to the highest income earner at 99% and any positive income (of which I am expecting a considerable amount) apportioned at 99% to the lowest income earner.

In other words my PAYG is quite significant, my wife doesn't work. We are about to embark on a project with a very positive cash flow. I want to claim 99% of the interest myself, but protect the income by apportioning 99% of it to my wife.

It's a 'cake and eat it too' theory.:rolleyes:

Cheers,

Ian.
 
In establishing a "tenants in common" 99% - 1% ratio, is it possible to apportion the interest on any loan to the highest income earner at 99% and any positive income (of which I am expecting a considerable amount) apportioned at 99% to the lowest income earner.

Ian, short version No. Long version No.

Hope this helps. :)
 
G'day Rixter!

Bugger!!!:rolleyes:

Ok, so it's one way, or the other. In essence I have to decide whether to offset my payg (put me as 99% and claim interest on loan), or protect the income derived from the venture (put wife as 99%).

Income wins!!

ps I'm still yet to finish reading the ebook you sent me on developing.....i'm a slow reader and hopefully not too slow a learner :D
 
I take it you have exhausted your own taxable income then, to put your wife at 99%?

If so, why isn't the wife purchasing it solely in her name?

She does have a taxable income?
 
Rixter,

No, not totally, but it is quite low these days with a number of IPs in the mix and also the tax thresholds changing.

I suppose if I was to put a weighting to the decision making process, we would be better off protecting the considerable residual cashflow expected by keeping things biased to my wife, as the nett impact of claiming interest against my payg at approx 30% will be far outweighed.

I just wanted to do both!;)

Cheers, Ian
 
There's always Julia's salary packaging for rental property investors which an allow an unequal division of deductions.
 
I am not an accountant, so I am just going to give some examples below. But rememer to take into account not just the negative gearing aspects but also the CGT if you are going to sell. If you are earning 100k and have 99% your way to claim for negative gearing reason and you keep it and make a couple of 100k when you sell those tax deductions will be very quickly wiped out by the cg be added 99% onto your 100k.


Say your cg after 5 years is $200k, 50% cgt dic so $100k

99/1 so you ad 99K to your income in that year 100-150K you pay 40% 20K, 150-199 you pay 47% so 23K so that is 43K tax bill wife 65K 30% so she pays $300 TOTAL TAX $43,300

50/50 so add 50 k to your income you pay 20k tax, 50k to wife she pays 19k TOTAL TAX $39,000

50/50 but your wife is having a year off in the year you sell. You pay 20k wife pays $9,600 TOTAL TAX $29,600

or
You have a discretionary trust and

You still earn 100k and she earns $65k you would pay $39,000 as per above

or your wife has the year off in the year you sell. so distribute entire 100k gain to her. you pay no extra tax and she pays $27,100 tax TOTAL TAX $27,100


or youhave 2 kids is at uni and each earns $6000 for the year so you distribute $24k to each, so each pays tax of $3600 and $52 to wife (on her year off) and shes pays $10.2k TOTAL TAX $17,400

or you also have other kids, parents other reltaives that you can distribute to and reduce your tax even further

Which of the above scenarios might occur in the future? who knows. That's why I like trusts because they are flexible if you split percentages you are trying to guess your future situation. Imagine it was 20, 30 or 40 years in the future and you were talking about millions in gains that would make having options even more important. The tax savings might even be significant enough to go a long way towards a deposit for you kids or grandkids
 
Thanks for the many different scenarios above.

Once purchased as tenants in common 99% in my name and 1% in my wife's, would it not be possible to later down the track change that to 1% in my name and 99% in my wife's name once it's well and truly positively geared or being sold for CG?
 
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