In whose name should you buy?
Frequently, couples and partners jointly own property, including investment property.
The most common forms of legal ownership can be either Joint Tenants or Tenants in Common.
The main difference between the two is that Joint Tenants hold an equal interest in the property, while Tenants in Common may hold different proportional interests.
The Australian Taxation Office (ATO) requires that investments held via Joint Tenants must divide the income and expenses equally.
Tenants in Common must divide the income and expenses in direct proportions to their legal ownership.
With Joint Tenants, all income and expenditure is divided equally, 50 per cent to each party.
This applies to any income, tax liabilities or deductions.
For Tenants in Common the percentage apportioned to each party is established at the time of purchase. This means that one party can have, for example, 30 per cent ownership and the other party 70 per cent.
These proportions then dictate the split of all related income, tax liabilities and deductions.
It is easy to check the legal position by referring to the title deeds for any property.
There is often a significant disparity in the duel incomes of people purchasing in partnership.
In order to maximise the contribution of potential tax credits, the greatest percentage should be applied to the main income earner.
In either case, any other form of partnership cannot be established to override or change the position dictated by the title to the property, so it is important to determine the Tenants in Common percentage split at the time of purchase. To alter it at a later date could prove a costly exercise.
As a general guideline, if you are buying in a partnership, varying the percentage ownership using the Tenants in Common option has the potential of providing a significant increase in tax credits courtesy of the ATO if a sizeable disparity in income exists between the partners income.
You should seek advice from your accountant or solicitor before making any decisions in this regard.