Negative Gearing and Capital Gain Tax

[jafarzadeh1977]

I purchased a property last weekend in Melbourne as an investment ($300,000). The rent would be $1200 per month and the mortgage payment would be $1700 per month ($100 principal and $1600 interest). I have got two little kids. I earn around $110k yearly and my partner earns around $20k yearly.

I have two questions as follows:

Capital Gain Tax:
to reduce the CGT, is it worth if the kids being shown as the only owners? Is there any discount for kids on CGT?

Negative Gearing:
Is it worth that I being shown as the only owner to increase the negative gearing as I earn more than my partner?

 

[geoffw]

I don't know if you can even change the owners without incurring stamp duty.

There is a very small amount of income minors are allowed to earn before they have to pay tax anyway.

The person who gets the benefit of negative gearing is the same person who is taxed on the profit.

Having a property in a trust can have some benefits for tax- but negative gearing is a problem. It can be done with a particular trust setup but there are downsides. If done it's best to purchase through the trust.

 

[HillsGirl]

It would benefit you taxwise to have the property in your name, I personally, as a wife would like it to be 99% husband, and 1% me...just so that the property cant be sold without my permission.

Your wife will then claim 1% of all income and expenses.

Possibly purchase under a Discretionary Trust arrangement, then the profit/loss can be distributed to whomever it benefits the most in that particular tax year.

The amounts that can be distributed to children has been drastically reduced now.

The CGT will need to be attributed to whomever the property is owned by.

The children would be taxed heavily.

 

[Terry_w]

nd $20k yearly.

I have two questions as follows:

Capital Gain Tax:
to reduce the CGT, is it worth if the kids being shown as the only owners? Is there any discount for kids on CGT?

Negative Gearing:
Is it worth that I being shown as the only owner to increase the negative gearing as I earn more than my partner?

A child doesn't have legal capacity to enter a contract - could own a house, but no lender would lend. Besides, kids are taxed at up to 66% so it would end up costing more anyway.

It may save you tax in the short term to have the higher income earner own more of the property, but what happens when rents increase or the property is sold? Tax is only one consideration anyway.