Hi all just found this forum recently and so far I am reading heaps and learning a lot. I have a tricky question. My wife and I have recently seperated, we bought a house last year and have a 2 year old boy together. I was thinking of buying my wife out and renting out the property but other people have advised me I should either buy her out and rent the house out, or buy her out sell the house myself and then buy a new house / apartment as there's more deductions that I can claim. I have no real experience in this area and I was looking for the help of someone who knew a lot about this
Thanks
Before thinking too much, consult your family law solicitor. If you buy her out before there is a judgement made against you for support and division of assets, then you may end up having to compensate your ex twice for the one property. ie buying her share now, and again later when you are judged to have $X in assets and splitting those between you, your ex and your kid.
Thanks for the tip mate. But once I buy her out which way do you think is better
@ Gords – It is difficult to give a straight answer with not much information.
You have to be careful, if you buy her out and then sell the house and buy a new one then you are looking at paying a lot of stamp duty and closing costs, which will negate any tax benefits you might have in buying a new property.
If you have paid off a lot of the property and it is positively geared then what tax benefits are you trying to achieve? Positively geared property don’t allow you to deduct much tax (except in the case of a lot of depreciation) and thus the tax advantages will be negligible.
In my opinion it is not wise to purchase a property based on the tax benefits. Just cos you save some tax doesn’t make something a good investment. Buy her out of the house if you deem it to be a good investment, if you don’t let it slide.
Plus (looking at the family/emotional side of things), it might be better to sell the house together, take half and then move on. My parents recently divorced and my dad was considering buying the house more our of emotional attachment than sound investment decision. If he kept the house it would have kept the bad memories of the split for everyone in the family and made it hard to move on with our lives. By selling the house it gave everyone in our family a fresh start. I know your boy is only 2, but selling might allow you and your wife to have a fresh start. There are plenty of good properties out there, so it might be worth selling this one for the emotional benefit and buying a new one. A symbol of letting go of the old and embracing the new.
Ryan McLean
http://CashFlowInvestor.com.au
Positive Cash Flow Properties Are Just a Click Awayps. Buying her out and then selling the house seems silly. You still end up with half the profits (cos you had to buy her out). If you were going to do that you may as well just sell it and take half.
Ryan McLean | On Property
http://onproperty.com.au
Email MeHi Ryan, thaks for the reply. We have paid about $10,000 off our loan so far as we only bought the house late last year. The house is about 20-25 years old and we have done a few minor renos like floor boards , re painting etc after we purchased the property. I get what you are saying about selling the house and starting fresh
Thanks
Gords
Hi Gords.
Is there any possibility she may be able/willing to buy you out?
G
No she doesn't have the money to do that
Also watch out for any CG implications. If you transfer an asset under a family court order you may inherit (or give) the CGT implications with it.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Also watch out for any CG implications. If you transfer an asset under a family court order you may inherit (or give) the CGT implications with it.How does that work Terry ? I thought if I bought her out and the loan and the home was in my name only I avoided any Capital Gains Tax
Yes, CGT on the sale may be avoided, but you will inherit her cost base so, in effect you could be paying her CGT bill too – laster on when you sell.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terryw wrote:Yes, CGT on the sale may be avoided, but you will inherit her cost base so, in effect you could be paying her CGT bill too – laster on when you sell.So how do I avoid this then Terry ?
Just take it into account when dividing up things.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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