When purchasing an investment property, what is the most appropriate ownership structure to maximise tax benefit?
Asked by Shane Gold Compliance Officer at First State Super
If the property is jointly owned in equal proportion by both spouses, the spouse with a higher income (higher personal marginal tax rate) would receive greater tax benefits when claiming a tax deduction on relevant expenses. On this basis it would make sense for the spouse with a higher income to have the property 100% in their name. But on the other hand, when the property is sold and realised a capital gain, the spouse with a lower income would pay less capital gain tax. However, in a scenario where the property is sold when both spouses have a low or no income (eg retirement), it would be best to have the higher income spouse owned the property 100% from the start. This scenario provides greater benefits in terms of claiming a tax deduction and paying less capital gain tax, which is a win-win scenario? Do you agree with my theory? Any advice or comments would be greatly appreciated. Many thanks Shane.