Property Investment Tax: Income shrinking

mponderosa on 16/10/2015 - 10:42
Last edited 16/10/2015 - 10:42

Hi

I am looking for help and advise about claiming tax this year.

I have an investment property under my name and usually I get around $5,000 tax return every year. My wife usually has got around $2,000 tax return every year. However all claim related to the property is always on my tax as I got higher income.

Due to redundancy, my annual income has been shrinking dramatically since July 2014 and I believe by the end of June 2015 the amount of tax I pay would be much less than $5,000. My wife income is much more than mine now.

My question is:

  1. Given that the investment property is under my name, and my wife's income is much higher than mine, can she now claim the investment property instead?

  2. If number 1 is not possible, as I got a reduced income, can we split the claim so both of us claiming the tax return so we still get an optimal result?

  3. Would that be better to wait until next financial year and claim the tax next year (e.g. claiming 2 years of tax together next year, from 1 July 2014 - 30 June 2016), can we get better result by accumulate my income just in the last 4 months?

Is there any other better option that I should consider so I could fully claim my investment property tax?

Thank you very much and looking forward to your advise.

Financial

Comments

  • ohsnap on 16/10/2015 - 11:13
    +1

    Legal property of the owner reports the investment, so if it is in your sole name, options 1 & 2 will not be possible. It does not matter when you do it, all the income/claims made will be dependent on the financial year it was incurred. Waiting to the next financial year only means you're lodging your return late and risk getting penalised for late lodgement. Will not make a difference as to the amount of refund you receive for that single year no matter how long you accumulate it for.

  • Shibuya on 16/10/2015 - 12:21

    You should speak to your accountant, but from my experience if the property is under your name then your wife cannot just start making claims on the property. If both your names was on the property then you could adjust the percentage of ownership and make claims accordingly.

  • snook on 16/10/2015 - 14:14
    +3

    You can only claim under the property owner's name. If you want to change ownership, you must go through the whole process of title transfer, and note that stamp duty IS always payable. If you have a loan on the property that is also in your name, you will have to refinance in the above process because the bank is holding the title you want to transfer.

    Your tax is calculated on one financial year at a time, so no, you can't stretch it over multiple years.

    It honestly surprises me that people don't know these things but there you go.

    I assume you're talking about missing out on the negative gearing aspect of your tax - hey, bad luck. This is specifically why they say negative gearing is 'geared' towards the rich. It is only truly worthwhile when you are in the higher tax brackets because you are paying more tax, and lots of it - because, it is that tax that you're getting back. If you haven't made enough to get taxed excessively, then there isn't any extra to get it back from.

    • Steptoe on 20/10/2015 - 16:00

      note that stamp duty IS always payable.

      In NSW you can get an exemption transferring to Spouse/DeFacto. Even a partial transfer.

      http://www.lpi.nsw.gov.au/about_lpi/faqs/land_title/paying_s…

      [edit]

      Also same for VIC

      http://www.sro.vic.gov.au/land-transfer-duty

      Exemptions and concessions

      A number of exemptions and concessions for land transfer duty are available. Many of these are aimed at homebuyers, but others include:

      Transfer between spouse or partner – an exemption for transfers between partners and spouses, including transfers arising out of a breakdown of a relationship

      • snook on 21/10/2015 - 13:27

        This is only for breakdown of relationship and, within a certain time period after that breakdown - note: "where a number of conditions can be met".

        I know, I've tried it.

        • Steptoe on 21/10/2015 - 13:32

          A friend used it in NSW with his partner to refinance 2 investment properties that were held in single names, to release capital.

        • snook on 21/10/2015 - 13:57

          @Steptoe: well I've done it twice in NSW and had to pay stamp duty twice so I've been ripped

  • Magnate on 23/10/2015 - 08:12

    Wow. See an accountant.

    This is what is wrong with Australia's "I must invest in Australia for negative gearing" philosophy.

    • rmamila on 03/11/2015 - 13:54

      Negative gearing is only good for ATO and those real estate agents. You end up paying 2 third of the cost out of pocket which would otherwise be spent for your own living. It only works as a cost reduction but not a silver bullet. That's just an incentive to attract investors.

  • CheapskateQueen on 24/10/2015 - 01:20
    +1

    It baffles me how little people know about how taxes work. I'm also scared/curious to know what OPs tax returns look like and what he claims.

  • rmamila on 03/11/2015 - 13:53

    ATO has clearly mentioned in their web site that you cannot claim for your investment property against your partners income just because the partner pays in higher tax bracket. Unless you transfer the ownership of the property to your partner you cannot do that.

Login or Join to leave a comment
Login Join