If a property is purchased by two people and both are working, are you allowed to specify which income you would like to claim the tax benefits against or does the accountant automatically combine both incomes?
*Confused*
[eh]Hi mrsimba2, the incomes are left separate for tax purposes. I could be wrong but I think the amount you can claim on each income is calculated on the percentage of ownership on the title for each individual.
As always.. check with an accountant.. [blush2]
<<<the amount you can claim on each income is calculated on the percentage of ownership on the title for each individual.>>>
Thats my understanding.
If you purchase with two names on a contract, that’s automatically deemed a 50/50 partnership. I believe you can have a solicator draw up some documents to make it 70/30 or whatever you like but remember this will only split your income, NOT your liability. You are always 100% liable as a partner in a partnership (if you’re partner bails to Costa Rica) for example.
Note this my understanding from WealthGuardian so feel free to correct me
Ben Carbery
MrSimba2,
If two people purchase an IP under common tenancy, the legal ownership is 50/50. The deuctions are allowed in line with ownership rights ie 50/50.
If you buy as tenants in common, you can assign whatever ownership split you like. ( eg 60/40, 85/15 etc). There might be some advantage if for example a couple had significant diferences in income and assign ownership to maximise tax deductions.
Under tenants in common, both people are joint and severally liable for the debt. That is, you guarantee the due performace of the entire loan, including the other person’s share.
For the purposes of serviceability and LVR for another IP purchase, the entire loan and the entire loan payments are taken into account (not just your share).
James
Originally posted by georgisj:If two people purchase an IP under common tenancy, the legal ownership is 50/50. The deuctions are allowed in line with ownership rights ie 50/50.
If you buy as tenants in common, you can assign whatever ownership split you like. ( eg 60/40, 85/15 etc). There might be some advantage if for example a couple had significant diferences in income and assign ownership to maximise tax deductions.
James
HiMrsSimba,
Just clarifying James points here – income and expenses are appportioned consistent with the ownership arrangements as stipulated on sale documents.
In James example (A owning 60% & B owning 40%) investor A – declares 60% of rental income to their name and also claims 60% of the costs. Investor B declares and claims the remaining 40%.
Common tenancy is sometimes referred to as ‘joint ownership’
Derek
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Hi There,
Firstly you will have to decide the percentage ownership between the two properties. Your accountant should be able to help work out who would benefit the most ie who would receive the bigger tax benefit. How ever once this is decided you can keep switching ownership percentages around. If you do it will incur stampduty fees which wouldnt make it worth the trouble.
Cheers
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