Ownership Structures - Negative vs Positive Gearing

Hi Everyone,

I've just made an offer on my 2nd investment property when i thought i should check what ownership structure i should opt for.

I have the larger income $200k
My wife has an income of approx $35k

I would normally put myself as the 99% share and my wife as 1% so that i can recoup a higher tax refund from any negative gearing impacts.

As my strategy will be a buy-and-hold scenario. Over time my IP will become positive and then it would be beneficial the IP income to be taxed at my wife's lower marginal tax rate.

As such I'm interested in how people have structured ownership to accommodate?

Thoughts?
Q
 
Why not change up who'll receive the benefits of owning the property every year as your circumstances (and the properties returns?) change ?
 
I'd plan for the longer term scenario around my end goal.

My end goal is to be cash flow positive to the point where we're both living off the income of the properties and not having to work. For this scenario, 50/50 ownership would be optimal.

If your strategy involves selling the property at some point, perhaps plan to that outcome.
 
Why not change up who'll receive the benefits of owning the property every year as your circumstances (and the properties returns?) change ?

I imagine that sooner or later the tax man will notice this and have some thoughts on adjusting the ownership constantly to get the optimal tax outcome.
 
First thing to consider would be land tax. What state is IP in and have you reached thresholds yet?

If the IP is in NSW and you have unused thresholds you may (or not) rule out a discretionary trust because of the cost.
 
Thanks for the replies guys this really helps. Can someone point me in the direction of a thread that explains discretionary trusts in more detail as I'm a complete newbie in this regard
 
Use the search forum tool.

In NSW you will pay land tax in prop in a discretionary trust each year. There is no threshold for disc trust. Also buying all properties jointly with wife on each prop in nsw means only one threshold $early $400k. If you buy separate names as well as joint you have two thresholds totaling over 800k + jointly. I know it seems weird but that's how OSR considers it. A few forumites can tell this story too. An SMSF gets another threshold as well.

Each state rules are different.

Terry has written some great structuring threads, search under his posts, you will learn a lot. Things to consider aside from land tax is asset protection.
 
Thanks for all the input. Lot of information to absorb as my brain is currently spinning with thoughts of land tax, disc trusts.

I'll take it away and think about it... perhaps the easiest thing to do for current purchase is to 50/50 with a view to setting up the appropriate structures for my next purchase.
 
Thanks for all the input. Lot of information to absorb as my brain is currently spinning with thoughts of land tax, disc trusts.

I'll take it away and think about it... perhaps the easiest thing to do for current purchase is to 50/50 with a view to setting up the appropriate structures for my next purchase.

There are a lot of structuring strategies you could implement in your own names.

You need to think about servicing as well - extending borrowing capability.

Locking yourself in 50/50 now may or may not be a wise move.
 
Why not change up who'll receive the benefits of owning the property every year as your circumstances (and the properties returns?) change ?

I wanted to change the percentages on ours and was advised, and confirmed, there will be all new stamp duties triggered here in Qld.
 
I wanted to change the percentages on ours and was advised, and confirmed, there will be all new stamp duties triggered here in Qld.

The only potential advantage of doing this could be to restructure your loan so that the loan amount matches market value so in effect the interest expense on this amount would be considered a tax deduction however you would need to factor stamp duty cost.... (perhaps other members could confirm)...
 
The only potential advantage of doing this could be to restructure your loan so that the loan amount matches market value so in effect the interest expense on this amount would be considered a tax deduction however you would need to factor stamp duty cost.... (perhaps other members could confirm)...

Interest will only be deductible if it is a sale at market value and there are borrowings to buy.

I've just done one in NSW without stamp duty or CGT. In NSW only possible for stamp duty exemption for the main residence going from one name to 50/50. Another reason to plan ahead and consider buying in 1 name only.

In VIC it can be done for investment properties too - no duty on any transfer between spouses.
 
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