Joint Loans: Negatively geared and capital gains for couples

Hi Fudge111 –

You are correct in your assumption that the rules that whichever owner/ borrower was directed the rental income or negative gearing tax deductions would by default also be the same owner/ borrower that the capital gain would need to be applied to once it is sold.

The best way around this would be to look into a Discretionary Trust and have it borrow the money. Both incomes are used to assess serviceability with the lenders. But you would then have the discretion to distribute the income (not loss – negative gearing) to whom every was a beneficiary of the trust.

The down side is because the loan is in the name of the trust, any losses i.e. negative gearing is trapped in the trust. But with Fixed interest rates of 4.98% or less for 5 years available from several lenders it shouldn’t be too hard to find a property that has only minor negative gearing.

There are people who will try to achieve the negative gearing in a trust by offering you a hybrid trust but the same problem as owning it in your own name exists in that you need to own the units in the trust and the end result is to negate the flexibility of the discretion.

Regards Albert

• This reply was modified 9 years, 3 months ago by  Albert Waldron.

Generally ownership determines deductibilitywhere spouses are involved. So X owning with the loan in the name of X and Y would mean X claims all xeductions and gets all income.