All Topics / Help Needed! / When loan is in my name only but the house is in joint names, does that mean I have all the negative gearing benefit?

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  • Profile photo of TerrywTerryw
    Join Date: 2001
    Post Count: 16,213

    opinions of ATO staff don't hold much weight I am afraid. I had a friend who worked at the ATO for years, he told me about one guy on the phones there who just used to say yes to everything.

    The law says if you incured interest on money borrowed to invest then it is deductible.

    In your example the husband is borrowing the full amount of the cost of the shares, but he really only owns half of those shares. If he only uses 50% of the money borrowed to buy the shares, where has the other 50% gone? The wife has used it to buy her 50%. So essentially he has onlent the money to the wife to buy the shares.

    I would say there is a strong case that the wife can claim 50% of the interest in this case.

    Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
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    Lawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide)

    Profile photo of BankerBanker
    Join Date: 2010
    Post Count: 371

    With property; as an example. If you buy In joint names; husband and wife for 200,000 and husband borrows 200,000 could you not also look at it as husband paid 200k for a 50% share. The 200k was still borrowed for investment purposes. There are plenty of examples where husband and wife get financial benefits from each others investments.

    I understand your point (Terry) and it all makes sense. If accountants have different views, the ATO can’t give a strait answer / and it falls in to a “grey area” – You have two choices;

    1. Ask for a private ruling from the ATO
    2. Take a punt on one of the options

    If I went option 2 I would simply take the punt in my favor. Even the ATO website says if you calculate something different than their instructions simply keep detailed record of how / why you calculated your deductions differently.

    Your reason for deducting is:

    100% of the loan went to the investment property for which you are on title and $xxx was what it cost you in interest – therefore you claimed it !

    Profile photo of WJ HookerWJ Hooker
    Join Date: 2007
    Post Count: 272

         I think you are all looking at it from your point of view.
    Now imagine you are the ATO.

    Someone comes to you and says I borrowed $2 to buy something that is worth $1, now I want to claim interest on the $2 loan.

    It's the way they would look at the property purchase, you cannot borrow $500,000 and use $250,000 to buy half a house and then claim interest on $500,000.
    The other $250,000 you borrowed is given away to your partner for the other half of the property, thus you did not invest it in something that earns you rent, so it is not an investment purpose.

    Remember we are only talking about interest on the loan here, not other things like rent, deductions etc. This is what the ATO lecturer was going on about, he was very clear cut about the ruling.

    Now I remember, the banks, solicitors, accountants etc have been telling me in the past..It doesn't matter who's name is on the loan, its who's name is on the title that determines who can claim interest on the loan…Which is WRONG.

    Also note the ATO says that : A guarantor on the loan is OK, it will not change the person who is making the loan.

    Maybe this site needs a rulings section for these things ??

    Profile photo of BankerBanker
    Join Date: 2010
    Post Count: 371

    I think you are all looking far too much into it:

    this link covers almost everything you need to know about deductions regarding rental properties.Let’s not get carried away thinking residential property investment is sophisticated from a tax point of view. The only tax return simple than a person with a couple of investment properties, is a person with a job and no investments. If we looked at accounting like a school system it looks something like this:

    • Personal tax is like Accountant Kindergarten
    • Investment property trusts are learnt during accounting Prep
    • Small family Pty Ltd trading businesses are Accounting High School
    • At Accounting UNI your learn about larger public companies
    • Grown up accountants should know almost everything.

    Lets go back to Kinda. Read the link above. If the answer is not there (ITS NOT) the answer is simple: Take a punt or get a private tax ruling.

    Any accountant that advises otherwise is simply him/herself taking a punt. Problem is most accountants are stuck in pre-school.


    It does say in there you can calculate differently; e.g. apportion expenses to other parties as long as you can justify and confirm with records, I'll find it again and paste later. This would support husband being able to claim if he was paying.

    IT's all open to interpretation!


    Profile photo of housegoodieshousegoodies
    Join Date: 2010
    Post Count: 28

    thanks for all the wonderful responses, I have called the TAX Office myself given the senario of:

    Loan is in my name but investment property will be in joint names. Speak to a senior tax office adviser and he indicated regardless of who's name the loan is on, tax office are accessing negative gearing based on the names on the title. In my case, I can only claim 50% of the interests + 50% of the depreciation, but on the rental gains, I also only need to add 50% of the rental gains.

    Taxman also advised me to go to online and download a publication called: Rental Property Guide 09 from the ato website, which contains many useful information.

    Profile photo of devo76devo76
    Join Date: 2007
    Post Count: 542
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