Review property ownership
The state of the residential market may provide, depending upon the circumstances, an excellent opportunity to transfer your investment property into the name of a lower earning spouse – depending upon your circumstances.
This strategy may enable you to pay less CGT on the transaction than if the property were transferred after prices had further risen. Further, you will possibly maximise long-term tax benefits by holding the property in a more tax-effective way.
Keep in mind, however, stamp duty and perhaps CGT are payable on the transfer of ownership.
As Robert Richards says: “It might be time to ask if the right person owns the property.” Depending upon the circumstances, you might even be able to claim a capital loss on the transfer of the property between spouses.
The property may have initially been bought in the name of the higher-earning spouse in an effort to maximise tax breaks for negative gearing. However, the rent may now exceed or at least equal the interest payments, meaning the property is no longer negatively geared.
However, stamp duty can be a killer for this strategy,” Richards cautions.
A twist on this strategy is to consider the feasibility of selling an investment commercial property, currently held in your own name, to your concessionally-taxed, self-managed super fund (SMSF).
Eddie Chung warns that superannuation law prohibits SMSFs from acquiring residential property from a member or other related parties to the fund. The asset involved would have to be a business property.
See our free ebook on the top 24 tax strategies for property investors.
