Blog Details

When it comes to purchasing an investment property with your partner, the natural instinct might be to buy it jointly. However, there can be significant tax benefits when property is purchased in just one person’s name—especially when you plan ahead.

‍

This article explores some of the key advantages of buying in a single name, particularly for married or de facto couples. Of course, legal and personal considerations will always apply, so it’s important to seek advice before acting.

‍

1. Strategic Spousal Transfers and Borrowing

Some Australian states allow for a property to be transferred from one spouse to the other without triggering stamp duty. This opens up useful planning opportunities. For example, the receiving spouse can borrow funds to purchase the property, while the selling spouse can use the proceeds to pay down non-deductible personal debt—such as a home loan. Done correctly, this can improve your overall tax position without losing ownership within the family.

‍

2. Smarter Use of Offset Accounts

Offset accounts are a powerful tool when used strategically. Where one spouse earns significantly more than the other, parking surplus cash in an offset account linked to the higher earner’s investment property can reduce taxable income more effectively. However, this works best when the property is in that person’s name alone. If the property is jointly owned, the tax benefit is diluted, and the flexibility is lost.

‍

3. Capital Gains Tax Planning

When it’s time to sell an investment property, how it’s owned can make a big difference. If both partners hold the property jointly, any capital gain is split between them. But when a property is owned solely by the lower-income spouse, the capital gain is taxed at their marginal rate—often resulting in substantial savings, especially if that spouse is temporarily earning little or no income (such as during maternity leave).

‍

4. Estate Planning and Testamentary Trusts

Owning a property in one name can also provide long-term tax benefits in estate planning. For example, rather than passing a property directly to a surviving spouse—who may already be on a high income—it may be more tax-effective to leave the property to a testamentary discretionary trust. This can allow income from the property to be distributed to minor children (under 18) at adult tax rates, potentially reducing or even eliminating tax altogether.

Even where property is owned as tenants in common, your share can be directed into a testamentary trust—but owning the whole property allows for even more control and benefit in this area.

‍

5. Relationship Breakdowns

In unfortunate cases of relationship breakdowns, sole ownership can make the division of property simpler. It can also offer tax benefits—such as avoiding non-deductible borrowing costs when one party has to buy out the other’s share.

‍

6. Improved Borrowing Capacity

From a lending perspective, buying in one name can sometimes increase the overall borrowing capacity of the couple. Banks often assess both parties on the entire loan amount when property is jointly owned, even if they’re only entitled to half the income. By separating ownership and liabilities, lenders may assess each person on their own share, which can be more favourable depending on the situation.

‍

Final Thoughts

While buying property in one name can offer real tax and strategic benefits, it’s not suitable for every couple or situation. Legal risks and implications around ownership rights, asset protection, and relationship changes must be considered.

‍

If you’re unsure about the best structure for your next property purchase, we recommend speaking with a qualified tax agent and legal adviser. Getting it right from the beginning can save you thousands—and give you greater flexibility for the future.

‍

Need tailored advice? Contact our office to discuss how property ownership structures can align with your financial and personal goals.