What sort of contract?

[Bran]

I had this all figured out, but somehow have gotten my head in a spin.

For my latest purchase, I need to access most (all) of the negative gearing/tax offsets as my wife earns zilch.

The loan is purely in my name, but the contract has her name.

I cannot figure out how to make this work.

We have another two properties, I am the only one on the title/contract/loan on one, and we are tenants in common 90% her/10% me on another.

Should we be joint tenants? Can I still claim all the tax?
Tenants in common 99%/1%?
Something else? Despite needing the asset protection, I've decided that I need the cash this year, rather than deferring the tax benefits etc.

The loan has only my name on it.

To complicate it further, we have taken quite a liking to the property and might just move in for 3-5 years. Does this change things or how I should set it up?


Aaargh!

Thanks

 

[D.T.]

Ownership is what determines deductibility, not the loan. The loan could be in my name for all you care, you'd still get full deductibility on it.

If you want the benefits, then it (the property NOT the loan) has to be entirely in your name (or at least majority of it, say 90/10 or 80/20 or whatever you decide). Generally the purchase contract has to reflect this. You can change it afterwards but its not ideal.

Alternatively you may want to look into buying with a discretionary trust. This will allow the trustee to determine who gets what on a year by year basis. For example maybe this year you both earnt well, so just distribute 50/50, then next year maybe it needs to be 0/100 because she isnt working and therefore is on the lower tax bracket.

 

[Bran]

Ownership is what determines deductibility, not the loan. The loan could be in my name for all you care, you'd still get full deductibility on it.

If you want the benefits, then it (the property NOT the loan) has to be entirely in your name (or at least majority of it, say 90/10 or 80/20 or whatever you decide). Generally the purchase contract has to reflect this. You can change it afterwards but its not ideal.

Alternatively you may want to look into buying with a discretionary trust. This will allow the trustee to determine who gets what on a year by year basis. For example maybe this year you both earnt well, so just distribute 50/50, then next year maybe it needs to be 0/100 because she isnt working and therefore is on the lower tax bracket.

Thanks.

How and where are the proportions indicated? Are these proportions specified without being tenants in common? I presumed that given we are married, anything other than TIC is 50/50.

The income ratios are very unlikely to ever change.

When is the ideal time, or when is it too late to sort this out? We have signed a contract, but not yet gone unconditional.

 

[D.T.]

On the purchase contract it'll say the purchaser something like 'Mr John & Mrs Mary Smith as joint tenants' or something similar?

You really need to talk to your conveyancer/solictor if you want to edit the contract. They'll advise whether its possible and what the costs /ramifications are.

 

[Terry_w]

I had this all figured out, but somehow have gotten my head in a spin.

For my latest purchase, I need to access most (all) of the negative gearing/tax offsets as my wife earns zilch.

The loan is purely in my name, but the contract has her name.

I cannot figure out how to make this work.

We have another two properties, I am the only one on the title/contract/loan on one, and we are tenants in common 90% her/10% me on another.

Should we be joint tenants? Can I still claim all the tax?
Tenants in common 99%/1%?
Something else? Despite needing the asset protection, I've decided that I need the cash this year, rather than deferring the tax benefits etc.

The loan has only my name on it.

To complicate it further, we have taken quite a liking to the property and might just move in for 3-5 years. Does this change things or how I should set it up?


Aaargh!

Thanks

Sounds like you are confusing contracts with titles with loans.

Legal owner of the property gets the income and claims the deductions - unless some sort of trust or partnership relationship.

All owners must go on the loan or guarantee the loan. Non owner spouses can go on the loan, even though they may not be on title. But the legal owner is the one that gets the income and deductions.

Legal owner means the one of title.

Contract could be in the name of A but settlement could occur in the name of A and B or even just B.

 

[Terry_w]

It is the transfer document where the ownership is specified - JT or TIC and if TIC what percentages. The transfer determines what goes on title.

Seek legal advice before deciding on what ownership structure to use. Joint tenants has some asset protection risks such as
- A dying just before B becomes bankrupt
- A dying and then B marrying C. B dies, C keeps the lot

With TIC you get set up a testamentary discretionary trust to prevent the above happening.


Also it is not a good idea to go 99%/1% as this drags down the serviceability of the 1%er and exposes the 1%er to high risk for little reward.