Are death and taxes the only certainties in the life of a property investor?

People say there are only two things that are certain in life – death and taxes.

But when it comes to property and taxes, there’s much, much more!

Over the last 30 years of being in “Practice” and managing clients’ affairs and having seen the problems people get themselves into when investing in property, I have come to the conclusion that there is a third absolute certainty.

It’s absolutely certain that:

One’s circumstances will change as you goes through your life cycle

For example, you could be single today and married tomorrow.

You could be without children today but you may have children tomorrow.clock time calendar

You may be married today but divorced tomorrow.

You could be working today but unemployed tomorrow.

You could be working today but stop working tomorrow to be a full time mum.

You could be an employee today and self employed tomorrow.

You could be employed today but retired tomorrow.

The different scenarios are numerous…

But what you can count on is that it’s absolutely certain that your circumstances will change and this will affect your life.

So what has this to do with property investing and why are changes in one’s circumstances a potential problem with your property investments?

When your circumstances change it affects your tax and asset protection position.

For example you could be working today and paying lots of income tax so you buy a negatively geared property and in your own name to get a big refund from the Tax department.

However you fall pregnant and stop working to become a full time mum.

All of a sudden your income levels change and you are no longer paying those big taxes.

The result is that all that negative gearing, which was great whilst you were paying lots of tax, is now wasted and you wish you could pass the tax benefits over to your husband who is still paying tax.

The problem is…

If you were to transfer the investment property to your husband’s name then you have to pay capital gains tax and stamp duty.

You may buy an investment property in the name of the person who earns the highest income and pays the most tax in order to get the biggest tax refund but when the property is sold he will pay the highest capital gains tax because capital Gains tax is charged at the person’s marginal tax rate.

If he buys too many properties in his name then he will exhaust his land tax threshold and start paying a lot of land tax.

You could be an employee today with very little risk of litigation, but tomorrow you either start your own business or get promoted to a manager of your business and are liable for any mistakes and exposed to litigation.

All assets that are in your name are now exposed to predators, including the family home that could be in your name.

Some say that they have taken out insurance so therefore they are covered.

Just ask the flood victims in Queensland a few years ago, who took out insurance.

Home under umbrellaWhilst there were no problems, the Insurance Companies happily take your premium’s but wait till you try to make a claim and see the excuses they come up with to avoid paying your claim.

Recently a woman in Australia was sued by one of the Music Companies for illegally downloading songs on the internet.

She was required to pay $100,000 per song and there were 16 songs she downloaded.

That is a liability of $1,600,000 plus legal costs.

She was forced to sell her home valued at $600,000 to repay this debt.

Naturally if her home was not in her name she would have avoided having to pay this debt as they would have dropped the case because they would have ended with up nothing anyway.

Or if she had taken appropriate action prior to this problem occurring such as stripping the equity from her home, she could have avoided losing her home.

There are many ways to protect your assets…

And amongst these are:

  • Equity Shift where the equity in your assets are stripped away.
  • Or you could purchase your new investment properties in a safe haven such as a “Trust” whilst stripping the equity in your home so there is zero equity.
    Depending on your personal circumstances will determine what strategy can be used.
  • Our most popular strategy involves the granting of a life interest in conjunction with your bank loan to protect the family home.

Imagine if you’ve been buying properties in your name because you are the one paying the most tax and consequently and now you have 10 properties in your name and are about to retire to live off the rental income from your portfolio.

However you’ve have lost the tax break by not having half the properties in your spouses name to pick up the income tax threshold in her name.Man Signing Contract

You are now paying twice the tax that you needed to.

It’s important you get structuring and ownership entity advice before you buy an investment property.

Once you have exchanged contracts it’s too late and the cost of fixing the problem can be very expensive.

The stamp duty on the average property is around $25,000 plus all the legal costs to change the title to the correct name.

Want more of this type of information?

Ed Chan


Ed is a founding partner of Chan and Naylor accountants and a leading property tax specialist. He has co-authored 3 best selling books. As a seasoned property investor he shares his unique understanding of the relationship between property investment and tax. Visit

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