tenant in common % entitlement question

[Oshawott]

hi,

recently came across a very good deal but due to short term situation i cannot buy it on my own.

due to me having equity to become a security guarantor, have teamed up with a good friend of mine to do a JV.

the banks that broker have spoken to has said they are willing to accept the arrangement we have proposed BUT they want the contract to state the% ownership. (contract still subject to finance)

since im providing the 20% security deposit, and my JV partner borrowing the 80% they want that added to contract.

here is my question:
when its profit time, does the profit have to be an 20%-80% split or can it be 50% each based on a separate contract that we agreed to stating the equal split despite different % of ownership.

**please note that we have acknowledge and calculated the different scenarios that can happen so just need the question above answered*

thanks very much.

 

[Terry_w]

You can split up profit how you want. It is a personal decision. Get both legal and tax advice.

 

[Oshawott]

Hi terry,

Thanks for your answer. I am going to seek proffesional advice next week. In the meantime, can you clarify your answer, you mentioned that profit can be split up as personal decision, but from ato perspective (actual taxation of profit) is it 80/20 or is 50/50 possible talking purely tax pov.

Many thanks.

 

[Terry_w]

Yes profits could be split other than as per ownership percentanges. But you need tax advice and careful planning.

 

[Scott No Mates]

Hi terry,

Thanks for your answer. I am going to seek proffesional advice next week. In the meantime, can you clarify your answer, you mentioned that profit can be split up as personal decision, but from ato perspective (actual taxation of profit) is it 80/20 or is 50/50 possible talking purely tax pov.

Many thanks.

If one party contributes the equity and the other party contributes their skills/time etc then you need to work out what each has contributed to the deal and (providing that you have documented your decision for the distribution of equity & profits), then split it accordingly.

So if you have stumped up the deposit but play no further part - what do you get? is it 20% of the end price? Your 20% + growth/interest? More or less?