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Rent from IP to partner - reducing tax possible?

Discussion in 'Real Estate' started by danrts, 14th Mar, 2010.

  1. danrts

    danrts Member

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    26th Jul, 2009
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    Location:
    Qld
    Hi is it possible to have the rent from my IP (approx $30,000 pa) paid into my wife's bank account, so its considered part of her taxable income, (rather than mine) even though the IP is in my name? I'm on the top marginal tax rate and she is on the bottom
     
  2. CJ. Wentworth

    CJ. Wentworth Well-Known Member

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    the short answer is no. If she 'bought' the property off you then sure.
     
  3. GregR

    GregR Reid Consultants

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    Berwick Vic
    You can do what you like with the rental income, it can be paid into your partners bank account but that does not change the tax implications. If the IP is in your name, then prima facie the rental income is part of your taxable income. The IP expenses are then deductible against your income as well, so whether there is any tax benefit or cost will depend on the IP being negative or positively geared.
    If you are on a high marginal tax rate, make sure you are claiming all the expenses you are entitled to, including the often neglected depreciation and building allowance (if applicable).
    Greg
     
  4. danrts

    danrts Member

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    Thanks. Ok to transfer the property to my wife, can the value be done at well below current market prices to minimise the stamp duty payable, or can it be gifted or similar to attract lower stamp duties?
     
  5. GregR

    GregR Reid Consultants

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    I know Victorian stamp duty allows a transfer of ownership of a PPOR to a spouse with no stamp duty but I do not know Qld law on this.
    You need to do the numbers to see if this makes sense for you, no point spending $10k (whatever) on stamp duty for a $1k (whatever) pa tax benefit.

    If you are paying too high a tax amount, consider strategies to reduce and still build wealth, perhaps revalue and refinance the IP to extract equity to fund the purchase of another IP, but it depends on your long term goals and financial position.
    Greg
     
  6. jrc77

    jrc77 Well-Known Member

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    For a related party transfer in NSW you need to provide evidence (valuation etc) that the transfer amount is at market value. You could of course shop around to find a nice low valuation :) Suspect there will be a similar rule for QLD.

    Jason
     
  7. danrts

    danrts Member

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    Qld
    Thanks. Is it possible to somehow include my wife on the title as well as me, like as joint tenants in common. Does this incur the same stamp duty as transfer of ownership?

    Could the rent then be channelled all to her as she is on title or would the ATO look at it as tenants in common and expect 50% of rent go to each person on title?
     
  8. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Rent is earned based on the percentage ownership.

    Joint tenants (assuming there is only two of you) have an automatic 50/50 split of rental income.

    Tenants in common have rental income split based on the percentage ownership (eg 50/50, 60/40, 99/1, etc).

    All expenses are also split the same way.