Half shares in "investment" house

[RamonR]

Me and my partner bought a nice property in coastal hinterlands.
Have a very good chance of getting job there in years time and so we planned on renting it out till then.

When the time came partner became very picky and anxious about tenants ruining our place even though at the appropriate time we hoped to renovate it as house is prior 1985.

Anyway to cut a long story short, I will be moving into the property and paying her rent.
We have two separate lines of credit but both name will be on the loans.

Will it be possible for her to negative gear this property whilst I am living there but not her.

[jbocker]

Me and my partner bought a nice property in coastal hinterlands.
Have a very good chance of getting job there in years time and so we planned on renting it out till then.

When the time came partner became very picky and anxious about tenants ruining our place even though at the appropriate time we hoped to renovate it as house is prior 1985.

Anyway to cut a long story short, I will be moving into the property and paying her rent.
We have two separate lines of credit but both name will be on the loans.

Will it be possible for her to negative gear this property whilst I am living there but not her.

I think it should be possible, but definetly talk to an accountant, as it seems it can be potentially complex. Do think of the longer term, is the property going to be primary place of residence for both of you at some time, and for how long. In other words what was the objective of the purchase. Does your partner have a large ongoing tax bill that justifies the -ve gearing. Does the area have or you suspect will have large capital growth hence may eventually have a CGT. This may need consideration as you will renovate the property which will improve its value somewhat, this may be an issue depending on when your partner moves in. May need to get valuations done dependant on when circumstances change - when it changes from rental to own residence etc.
Are you moving in so that your partner feels more comfortable - ie the quality of tenants being an issue? May be better to get good insurance instead- there are a couple of good companies. Check them carefully - I have been stung badly once.
More I think of it sit down with the likely longer term plan, and some of the likely alternative scenarios (thinking of some likely/probable what-ifs) and discuss at length with an accountant. And keep very good records whatever option you take, dates things have changed and costs / receipts as money has been spent. Consider getting a depreciation schedule done too, if you are renting out the property.

[Mat]

Is this your first home. If so by you paying rent this may lose your FHOG benefits. Secondly i think she may be able to negative gear, however rent needs to be paid at market value. However my biggest concern is CGT consequences may apply if you ever go to sell your place. You should speak with your accountant before anything is put in place.

It may be worthwhile weighing it up CGT Vs tax you will save. If its the tenants your worried about, maybe you could live there and pay no rent. This would mean no deduction but also no CGT. Your accountant is the man to see.

[iconic]

Mat is right. The best way to learn that is to consult your accountant. But if you don't have yet an accountant maybe you can find a public accountant to ask for help.

[francinemelbour]

I guess there is nothing with your doing, as you said you will pay the rent.It would be fine for her. But you need to listen her side first before you make an action.

[Bronwyn]

If you do not have another property that you are claiming as your PPOR then I agree with Matt about the CGT consequences.

Even if your partner can claim some costs, the potential loss of PPOR benefits are likely to outweigh the benefits of the claims. The whole point of negatively gearing is the belief that the potential long term future capital gain will be greater than the short term losses, so it follows that the potential CGT would outweigh the claims you are talking about.

There is also the risk that that the ATO would view it as a personal benefit as both of your names are on the loans and you will be living there. Also, if your partner ever visits you there it would be personal use, like a holiday house. I don't know the answer to this one but I think that there is the potential for the ATO to knock it back so you should definitely get an accountants advice (preferably in writing) and even if it is allowable balance it against the loss of PPOR benefits.

[james700]

It may be worthwhile weighing it up CGT Vs tax you will save. If its the tenants your worried about, maybe you could live there and pay no rent. This would mean no deduction but also no CGT. Your accountant is the man to see.