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Viewing 11 posts - 1 through 11 (of 11 total)
  • Profile photo of katsu88katsu88
    Member
    @katsu88
    Join Date: 2003
    Post Count: 11

    Hi Wise ones,

    I’m about to purchase a house for my frist IP,(neg gear) but not sure what is best for tax and the bank.

    Suitation is , my partner is in the higher income than me and I’m about to losse my job due to retrenchment so I’m not sure how long that I will be out of a job. ( Banks does’nt know ).I pefer to have my partner name on the title because she is in a higher tax bracket.

    Questions

    1. How can I get one name on the title and would the bank be happy ?

    2. Is there a way you can change ownership without paying stamp duty?.

    3. What are my options.

    Profile photo of maximusmaximus
    Member
    @maximus
    Join Date: 2003
    Post Count: 189

    Hi ya Katsu. My understanding is that you should buy the property in the name of the highest wage earner when it is to be negatively geared (for tax purposes). You can still put tyour name on the loan if you wish as long as your partners name (only) appears on the actual purchase contract of the house. Pretty sure you will have to pay stamp duty on change of ownership ( I’m assuming you want to add your name to title deed somewhere down the line). As always, my best advice is to consult your accountant and/or a solicitor.
    Hope this helps
    Marty

    Profile photo of DramDram
    Member
    @dram
    Join Date: 2003
    Post Count: 82

    As far as I’m aware, you will incur Stamp Duty whenever you change ownership of a property.

    Cheers

    Profile photo of katsu88katsu88
    Member
    @katsu88
    Join Date: 2003
    Post Count: 11

    Thanks Maximus & Dram for both of your inputs.
    I will have both names on the loan , but plan to have one name on the purchase contract.( my partner)who is on a higher income.

    Bugger stamp duty gets you all the time….

    Thanks & happy investing !!!

    Profile photo of kooringalkooringal
    Member
    @kooringal
    Join Date: 2003
    Post Count: 31

    Katsu, as Margaret Lomas would say, don’t just think of today, think of tomorrow. If the investment property will be paid off or positively geared within a short time, maybe it should go in your name, so you will effectively be ‘income splitting’, ie not all income will be earned in name of high income earner. We should have done this with one of our properties, but we went in blindly and put it into my hubby’s name, since I was having babies, but now it is pos geared and I would be better off ‘earning’ the income than him, paying 47 cents in the dollar…

    SO, if the prop will be neg geared for ages to come, maybe in her name, but think…

    Banks are fine about prop being in one name and both names on the loan – how do YOU feel about that, you’re responsible for half the debt, but you don’t get half the house? Your partner can sell the house without referring to you whenever she wants? Do you trust her? If you plan to work again soon, and you’re not so certain your partnership is for life, I’d be getting my name on that contract too, and buggar the neg gearing bit…THINK. What does your gut tell you?

    Re stamp duty. I THINK, if you rent the house as an IP for a while, but then you both move in there, and it is your PPOR, ie you get your mail there, you put it on the electoral role as your address, etc, you can get your name put on to the house title free of stamp duty. Basically, ring Office of State Revenue if you want to check the rulings exactly, but effectively your partner ‘gifts’ half the house to you, for nil dollars, so no stamp duty owing, BUT ONLY IF IT IS YOUR PPOR, not an IP.

    Good luck.

    Kooringal

    quote:


    Hi Wise ones,

    I’m about to purchase a house for my frist IP,(neg gear) but not sure what is best for tax and the bank.

    Suitation is , my partner is in the higher income than me and I’m about to losse my job due to retrenchment so I’m not sure how long that I will be out of a job. ( Banks does’nt know ).I pefer to have my partner name on the title because she is in a higher tax bracket.

    Questions

    1. How can I get one name on the title and would the bank be happy ?

    2. Is there a way you can change ownership without paying stamp duty?.

    3. What are my options.


    Profile photo of johndjohnd
    Member
    @johnd
    Join Date: 2003
    Post Count: 25

    Hi Katsu88,
    Here are some points to consider.
    If you purchase a property in joint names, then the bank views the debt as jointly and severally liable. What this means is that if you borrow $200K then the banks treats it as both of you have borrowed $200K each totalling $400K which will severely impact your future borrowing capacity.

    One potential strategy is to buy in one name and only one person borrows the money. Which person for tax benefits ask your accountant.

    To overcome the trust issue execute a joint venture agreement to protect all parties involved.

    Don’t worry about making the bank happy, just make sure your happy. The banks aren’t happy unless they tie you up lock stock and barrel. Don’t allow them to cross collateralise your properties. Get a good finance broker to structure your finance which will benefit you not the bank.

    There is no way of getting out of paying stamp duty when you change ownership.

    Your other options are to look at a family trust structure where you can achieve all of the above benefits and not impact on your or your partners borrowing capacity at all.

    Hope this helps
    Regards
    JohnD

    Profile photo of fastainvestafastainvesta
    Member
    @fastainvesta
    Join Date: 2003
    Post Count: 14

    [If you purchase a property in joint names, then the bank views the debt as jointly and severally liable. What this means is that if you borrow $200K then the banks treats it as both of you have borrowed $200K each totalling $400K which will severely impact your future borrowing capacity.

    Quote:
    Johnd
    Don’t think this is right. My understanding is that you are both liable for the loan, but the amount of debt is $200k, not added together when you go for the next one. If you go for a joint I/P next time, the servicing required is based on the actual laon amount. If you go for an I/P purchased with borrowings in one name, then yes, the servicing calculators will take the total loan repayments as your individual commitment. BUt the rental income is credited to your name only also, so you will get some back anyway.
    You really need to look at the overall strategy and structure which your broker and accountant should help you set up.
    Profile photo of johndjohnd
    Member
    @johnd
    Join Date: 2003
    Post Count: 25

    Hi fastainvesta,

    I’ll try to clarify.
    Couple purchase one IP for $400K
    eg One partner earns $100k they may be able to borrow say $400K for IP based on serviceablity and the other partner also earns $100K they too can borrow say $400K for IP as individuals therefore collectively they could borrow $800k ie purchase 2 x IP at $400K each but if they are both on the title of the original IP then they can only purchase one. Seperatley they can purchase two, but collectively they can only purchase one. I hope this clarifies my point.
    regards
    JohnD

    Profile photo of spider_2spider_2
    Member
    @spider_2
    Join Date: 2003
    Post Count: 79

    [:)]
    You could put it in both names but specify 90% ownership to higher income earner and 10% for lower ( you can vary these percentages as you wish, it doesn’t have to be 50/50). This would help taxation deduction for higher income earner but still have both names on the title. At tax time the income/expenditure for the property is also split this way. It needs to be done at time of purchase and recorded – check with your solicitor/accountant.
    [:D]

    Profile photo of katsu88katsu88
    Member
    @katsu88
    Join Date: 2003
    Post Count: 11

    Thanks Johnd, Kooringal & sipder for all the inputs, it has help me to open my mind to what I can do. Thanks so much , now I will have to seek
    advice from my solicitor or my finicial advicer.

    It has been a learn curve for me and I appreciate all the people who replied, recently a much wiser person now… haha[:0)]

    Anyway I will think about how to set up a trust account?, and how easily could it be done.

    Interesting point that Johnd point out about the borrowing limit , in how the bank view you when borrowing in two name. And from you Kooringal “think of long term and not short term benefits”

    Have a nice day

    Profile photo of TerrywTerryw
    Participant
    @terryw
    Join Date: 2001
    Post Count: 16,173

    Hi

    I am a mortgage broker and think JohnD makes a good point.

    If you get a $200,000 loan with your spouse (or anyone) and then go for another loan on your own, when the bank looks at your serviceability, it will generally consider you liable for the whole $200,000 (But will only take into account half of the rent you receive for that property).

    This is a common problem I see daily. When things are borderline we can argue that they are only responsible for half the debt, and it will probably get thru, but when things are tight it is harder.

    So I think from a long term point of view (if you plan to buy many properties), it may be worth considering putting one person on title. Banks and Mortgage Insurers also often have maximum exposure limits (ie Max total lends) so keeping things separate will help.

    Terryw
    [email protected]

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
    Email Me

    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

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