Tenants in common or joint tenants

[bennos]

I am yet to see an accountant, that will be in a couple of days but wanted to get some basic info here so I at least know a little when speaking to my accountant.

Can someone explain in layman's terms (as much as possible) - what the difference is between 'tenants in common' and 'joint tenants' when buying an IP (myself and my wife)?

We are ready to purchase our first investment property, though we're both working at the moment, the plan for my wife to stop working in a couple of years (starting a family).

Will structuring the IP as 'tenants in common' at a 50/50 structure affect me being able to claim the full tax deductions when she quites working? Or is this a legal matter only? My concern is, does this mean that our tax benefits are going to be halved when we're on one income?

I guess what I'm concerned about is whether we should structure the IP in my name only for full tax advantages.

 

[bennos]

further info

Just found this article:

JOINT TENANCY

Joint tenancy is more commonly used by married couples and others in similar relationships. It is a feature of joint tenancy that when one owner dies, the survivor is automatically entitled to become the owner of the deceased's interest in a property.

A joint tenant cannot, by his/her Will, leave that interest to someone else. Upon the death of a joint tenant the survivor may apply to the Registrar-General's Office to become the registered proprietor of the deceased person's interest.

Joint tenants each have an equal interest in the whole of the property unlike tenants in common who have distinct shares in a property.

Looks like this concern of mine is only related to the legal side of things.

 

[Raddles]

Hi there
with joint tenants - the survivor takes the property in the event of the death of one party
in the case of tenants in common - each party has a % share in the property they can leave in a will.
It is important to have a long term approach - if you structure the property to take advantage of tax savings now - what happens when the property becomes cashflow positive - the person with the higher income will have more income to pay tax on the income earned.
If you are not proposing to use a trust structure - perhaps having the 50/50 split which can occur with a joint tenancy is still the way to go
thanks

 

[LynnH]

Will structuring the IP as 'tenants in common' at a 50/50 structure affect me being able to claim the full tax deductions when she quites working? Or is this a legal matter only? My concern is, does this mean that our tax benefits are going to be halved when we're on one income?

I guess what I'm concerned about is whether we should structure the IP in my name only for full tax advantages.

Hi bennos

If the IP is structured 50/50 as tenants-in-common, you will only ever be able to claim 50% of the costs. So, yes, your tax deductions will be affected when you are on one income.

May I suggest that you see a property-savvy accountant before you decide upon the structure in which to purchase your IP - it tends to get messy and very expensive if you have to 'fix up a mistake' down the track.

Cheers
LynnH