Tax deductible or not ?

[kph]

Hi all,
I have a scenario that I need some feedback on .

A couple own a block of land in Sydney, in joint names, its unemcumbered.
They have an LOC in place. The LOC is in joint names.
The funds in the LOC are drawn down and used towards the purchase of a property in Brisbane which is put in the wife's name.
The property in Brisbane is rented out.

The question is, is the husband entitled to claim half the rent and half the expenses incurred in running the rental property, and thus entitled to negative gear a share, or his share, of the transaction ?

I understand its the 'purpose' of the funds that determine the outcome, but with the property 100% in the name of the wife, does it make a difference to the outcome ?

This is a real example, but it does not apply to me, so any opinions and feedback from some of the experts here would be appreciated.

Thanks in advance..

kp

 

[Alanna]

My understanding is...
only the wife is entitled to claim - the property is hers and the lease is only with her (or should be) BUT she gets to claim 100% of interest and expenses. The fact that the husband is on the LOC statements is relevant only to the bank
ie my properties owned by trust, lease is with trust, but loans are in mine and husbands name with bank.

Maybe an accountant can clarify more for you.

Cheers
Alanna

 

[Cracker]

I'm no accountant kph but my understanding is no!

The wife is the only one to be able to claim the tax deductions cause it's in her name...whilst she can claim the tax benefits of the deductions she will also have to declare the income of rent.

 

[Mry]

Line of Credit - ding ding ding alarm bells! Better make sure they aren't spending on private stuff out of there.

Wife's name 100%? Then wife claims the income and expenses 100%. You are only able to claim deductions for income producing assets that you have legal title to (well there are a few exceptions but none apply here).

 

[kph]

Tks all for the replies.
Looks to be unanimous then....

Have confirmed that no private spending from LOC
Is all been used towards the property purchase, with the rent coming back to offset the interest due on the LOC, but the nett result is still negative so the LOC is not being reduced.

Thanks agaion
kp