When people buy property together, particularly if it’s with a partner or spouse, they will usually register the title in both people’s names. There are also other arrangements that are possible, several friends might opt to own individual shares in a property, for example, or a couple might choose to have only one of their names on an investment property title.
There are some MUST know facts to be aware of before deciding to buy property with other people. The following information provides you with a good starting point to help you on your way. Tax legislation and other Australian laws governing property ownership and investment are complex, so we recommend you seek proper legal and tax advice before entering into any arrangement.
Joint-ownership titles
The two main types of joint-ownership titles in Australia are joint tenancy and tenancy in common.
Joint tenants own the whole property together. If one of them dies, ownership passes to the surviving tenant or tenants, you can’t sell or transfer your ‘share’ in a joint tenancy. This is the most common arrangement when a couple owns a family home.
Tenants in common own individual shares in a property, and those shares do not have to be equal. Shares in a common tenancy can be transferred to someone else. When one tenant dies, their shares pass to their estate.
Tenancy in common is a useful arrangement when a group of people want to buy property together. Each tenant can own a share proportionate to how much money they’ve contributed and can sell or otherwise dispose of their share as they wish (unless the tenants have entered into a prior agreement that prohibits this).
One person’s name on the title
When you’re buying an investment property with a spouse or partner, there could be tax and other advantages to putting the title in only one person’s name.
The interest payable on the investment loan and ongoing property maintenance expenses are usually deductible for tax purposes. The tax benefit will be greatest for the partner on the highest income.
Conversely, capital gains tax is payable when you sell an investment property. Capital gains tax is payable on the net gain at your marginal tax rate in the year the gain is realised. If the property is in the name of the partner who has low or no income, less tax could be payable than if the income from the capital gain was shared with the partner with a higher income.
It is extremely important to consult with your tax accountant before purchasing an investment property to ensure you have thoroughly considered the tax implications of property investment.
Future borrowing
If you are considering buying property with other people and would like to discuss the best option for you, one our expert brokers will be happy to assist you. You can book a free consult by calling (08) 9367 4222, email us or fill in the contact form on this page.