When buying a property this is the most important question. While it is very rewarding to have your name on the title to your property there are many factors that must be considered before putting pen to paper.
The difference is significant.
Joint tenants means that upon the death of the first of the purchasers, that person’s share automatically passes to the survivor outside the terms of their Will. This option is mainly used by couples. The benefits of this option include:
Tenants in common means that each purchaser has a fixed interest in the property in the proportions agreed by the purchasers. This share does not automatically pass to the other purchaser upon death. This is mainly used by non couples. Benefits of this option include:
Neither of the above options will protect the property in the event of a bankruptcy of either Purchaser.
The issue of joint tenants or tenants in common is particularly relevant where there may be complicated family arrangements such as children from previous relationships. Specialist advice should be sought for your individual circumstances.
If a purchaser is at risk of:
Or if the purchaser:
Then consideration should be given to buying in a spouse’s name, trust, superannuation fund or other entity’s name. To buy in the purchaser’s name who is at risk puts the property at risk. Advice should be taken on the option that best suits your needs.
You should obtain your own independent accounting advice. Basic things to note are:
For issues of negative gearing you must seek independent accounting advice.
It is the golden rule. The bank has the gold and you must abide by it’s rules. The bank may ultimately decide how you acquire the property before it agrees to lend you the money to complete the purchase.
Generally the principal place of residence is not taken into account in the government asset test for social security benefits. If retaining pension benefits is important then this must be considered.
This is particularly relevant where a child is purchasing a property and mum and dad are assisting with the financing arrangements. We have previously been successful with a FHOG where a spouse’s husband died and she had never owned property in her name.
If a prospective purchaser receives government benefits then duty concessions may be available.
If future transfers of the property are intended (say for example because of one of the risk issues identified above).
Duty, CGT and GST are all big issues when transferring property. It may be possible to avoid some of these taxes. Accordingly when you purchase the property you should consider what is ultimately intended with the property. 2 notable examples of duty exemptions are:
A right of nomination is not automatic. A nomination allows you to specify that another person will purchase the property instead of you without incurring double duty. However there are strict requirements that must be met. Fail to meet these and double duty will apply.
You must take advice on all the above matters prior to purchasing a property. If you fail to take advice and do not purchase in the correct name the consequences can be significant including substantial costs to transfer it into the correct name including duty, CGT, legal costs, accounting fees and bank fees. We advise you to get it right at the outset.