joint tenants v's tenants in common

[cool bananas]

hi,

i purchased an IP with my parents (3 parties on the title) and the title shows "joint tenants".

When we bought the property, we arranged for me to put down 50% of the deposit and fees, and my parents contributed the other 50%, so we gave the bank a combined 10%deposit+fees.

I have been advised by my accountant that for tax purposes, under the "joint tenants" agreement, I am liable for the full mortgage amount but can only claim 1/3 of the expenses. He is not entirely sure, and is seekeing clarification. Does anyone know if the above is true or false? ......DaleGG please comment.

And how is "tenants in common" different?

CB

 

[RPI]

Yes this sounds like the case. Because you are deemed to be 1/3 owners

However you could set up a partnership, which basically means obtaining an ABN and a TFN from the ATO through the Australian Business Register. You then need to write a partnership agreement which outlines the roles of the partners (you, your mum and your dad) and the division of income (or loss). Then at tax time your accountant fills out a partnership return and the income or loss appears as partnership income or loss on each of your individual tax returns. The ATO website has information on how to set this up.

Darryl

 

[sanchez]

The tax department says that deductability of interest is proportional to your interest in the property, which in your case is 1/3, as joint tennents means an equal split among the number of owners.

Sanchez

 

[sanchez]

PS - I assume that the mortgage is in your name only. If this is the issue, I do not see the problem in you and your parents agreeing on a loan from you to them, at an agreed interest rate. You simply claim the interest paid to you as income and interest on your loan as an expense, and they claim the interest paid to you as an expense, to be offset against the investment property of which they are 1/3 owners each.

Please note though, that I am not an accountant, this is just an idea which you may wish to discuss with your accountant.

Sanchez

 

[Richard Hunt]

cool bananas,

Although the title is listed as joint tenant and there are three indiviuals on the title, it doesn't necessarily follow that each individual has a 1/3 share. This would only be the presumption in the absence of any agreement or understanding to the contrary.

For example, in the absence of other information, does the 50/50 split of deposit between you and mum/dad indicate an understanding that you have a 1/2 share and each of your folks has a 1/4 share? You guys are in a better position to answer that than I am.

 

[cool bananas]

Hi Richard,

Your Q: does the 50/50 split of deposit between you and mum/dad indicate an understanding that you have a 1/2 share and each of your folks has a 1/4 share?

Answer: Exactly! I want to proportion my rental income and expenses according to this split.

Are you suggesting that a signed agreement between me and my folks indicating this split is quite OK, and the ATO will accept it in case they decide to conduct an audit?

CB

 

[Richard Hunt]

CB,

Any assertion that ownership is in certain proportions has a better chance of surviving scrutiny from the tax office where the evidence bears this out. Information likely to be taken into account may include contributions to deposits and the balance of funding, agreements made between the parties on the title, division of property expenses and capital gains between owners, etc. The higher the degree of consistency between this information the more comfort you will have.

Any lack of consisterncy and the result comes less clear and more dependent on a weighing of the different issues. At this point your solicitor may be in a better position to advise you.