Property Investment mistakes - Getting ownership wrong
The way to have a great investment is not just to focus on the property itself but also to think about the other aspects that can make a significant different to your bottom line.
Let's look at an example of how two difference approaches for the same property achieved different results. A common mistake couples make when purchasing investment propertiy is to purchase in joint names rather than considering what will be the most tax-effective ownership split.
Lets' assume only one partner is working and earns $100,000 per annum. If the property is purchased in joint names then the income and deductions will be split equally
Partner 1 Partner 2 Income 100,000 Nil Rental income $20,000 10,000 10,000 Deductions - $40,000 20,000 20,000
Taxable income 90,000 -10,000 Tax saving 4,000 per annum Nil
If the property is purchased in Partner 1's name only then the rent and deductions will be as follows. Partner 1 Partner 2 Income 100,000 Nil Rental income $20,000 20,000 Deductions - $40,000 40,000
Taxable income 80,000 Nil Tax saving 8,000 per annum Nil
By getting the structure right up front our couple were able to improve their potential tax savings by $4,000 per annum or $20,000 over the next 5 years.
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