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Change of Ownership and tax deducation implication?

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  • Change of Ownership and tax deducation implication?

    If I bought a rental property under my own name, and it was negative geared (losing money), and the loss was deducted against my income. After a few years, the rental is now making money. What happen if I transfer it to my spouse who is not working (or have a share ownership)? Do we share the profit? Or it will still be treated as my rental property so tax is deduct against my income (high tax bracket)?

    Thanks.

  • #2
    Time to buy more property!

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    • #3
      Hi OneStepCloser,

      What is your commercial reason to transfer to your spouse? Be very careful just doing this for tax!

      Also note that it is not just a simple transfer. Need to value property, need to sell from you, need to buy in spouse, new loans etc, maybe effected by new LVR rule?, might have depreciation recovery or even tax implications if trader, developer etc or associated to one, or if caught by Brightline test.

      Generally this is why you should have used an LTC to start with to give you some flexibility later!

      Ross
      Book a free chat here
      Ross Barnett - Property Accountant

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      • #4
        A transfer to something like a Trust can be done for asset protection and estate planning reasons - quite valid ones. May be less hassle than other entities.

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        • #5
          Originally posted by Rosco View Post
          Hi OneStepCloser,

          What is your commercial reason to transfer to your spouse? Be very careful just doing this for tax!

          Also note that it is not just a simple transfer. Need to value property, need to sell from you, need to buy in spouse, new loans etc, maybe effected by new LVR rule?, might have depreciation recovery or even tax implications if trader, developer etc or associated to one, or if caught by Brightline test.

          Generally this is why you should have used an LTC to start with to give you some flexibility later!

          Ross
          Hi Ross,

          We are thinking about share ownership then full transfer. The reason is more personal than commercial (although tax is another reason). We feel more comfortable that we both own the property, instead of only one person owning it. But it sounds like quite a bit of a hassle. We were told by our accountant that LTC is more work to maintain and cost quite a bit more in terms of accounting fee, so we ditched the idea.

          Anyway, thanks for your help.

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          • #6
            Why would a LTC cost more for accounting fees I wonder.

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            • #7
              A sole trader is simpler to do annual accounts and tax returns for. Plus no need for company minutes. So yes there is a savings.

              But like many things, it is often better to look at the long term picture!

              Ross
              Book a free chat here
              Ross Barnett - Property Accountant

              Comment


              • #8
                Originally posted by Rosco View Post
                A sole trader is simpler to do annual accounts and tax returns for. Plus no need for company minutes. So yes there is a savings.
                What sort of differance are we talking about here - $ wise?
                Minutes are basically from a template so a couple of minutes work.

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                • #9
                  Originally posted by Wayne View Post
                  What sort of differance are we talking about here - $ wise?
                  Minutes are basically from a template so a couple of minutes work.
                  Company accounts require quite a bit more actual accounting work in the background, ensuring adequate tracking of reserves and etc. Also possible for some sole traders to not need an entire set of accounts, but companies do.

                  $ wise I charge an extra $100, but being all on my lonesome I'd imagine I'm a bit cheaper than the bigger firms.
                  AAT Accounting Services - Property Specialist - [email protected]
                  Fixed price fees and quick knowledgeable service for property investors & traders!

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