What name should you buy your property in?
Buying a property such as a block of land or an off the plan townhouse or apartment is a big decision, most people are focused on the location, layout, finishes, finance, etc – often not giving too much thought to the name on the actual title. Getting this wrong can potentially incur double transfer i.e., stamp duty, additional annual land tax, and even difficulty with obtaining a loan.
Most owner-stay buyers, when they purchase a property, simply put the property they purchase in their own personal name. If they are a couple, they usually both go on the title as ‘joint tenants’. The name(s) the title is registered in comes from the name(s) they write on the Sale and Purchase Agreement (usually called the ‘Contract of Sale’ in Australia). The solicitor or conveyancer acting on their behalf will usually double check all this information with the buyer before final settlement. This is the most common and simplest scenario.
The financier providing the mortgage usually wants the mortgage to be in the same name(s) as the name(s) on title – not only does this make it simple for the financier but may also lower the banks risk. Importantly, if there is only one name on the title, but 2 people are required to qualify for the loan – the bank may actually refuse the loan. Changing the title to both names may incur additional transfer (stamp) duty, and then if the loan is in both names – then both parties are EACH liable for the FULL amount of the loan (known as ‘jointly & severally liable’), which lowers the bank’s risk in case of mortgage payment default.
Sometimes two or more friends/siblings (rather than couples) may purchase a property together. They may not have contributed an equal amount to its purchase, and want to reflect this in the public registered ownership. In this case they, they may want to register the title as ‘Tenants in Common’ and note the ownership percentage eg 60%:40%, 25%:25%:50%, etc to reflect this. Their solicitor can usually help document and advise on this situation.
In certain states in Australia, writing the wrong name on the contract (or if circumstances change eg a parent want to put the property in a child’s name) may incur double transfer (stamp) duty. However, in Victoria, it is very easy to substitute the name on the contract (as long as the price hasn’t changed), so you will only pay transfer (stamp) duty once – your solicitor or conveyancer can advise you further regarding this.
Own-stay buyers never consider land tax implications for the name on the title, as their Principal Place of Residence (PPR) is exempt from annual land tax, however it is a different story for investors. Land tax is calculated on the 31st of December each year on the ‘unimproved land’ value (which is usually less than the ‘retail’ value of land), and sent to the owner. Land tax is a state tax, with total property value calculated independently of any other property held in other states of Australia. Each state has an independent threshold, for example in Victoria it is AU$300K per individual – so if the total ‘unimproved land value’ you own in your own name in Victoria is below this then you won’t pay any Victorian land tax in 2022.
Investors buying in Victoria need to be aware of this land tax threshold, especially if they want to buy property as a couple – as putting the wrong name(s) on title way may incur unnecessary additional annual land tax. A common example we see is an investor couple may purchase their first block of land as ‘Joint Tenants’ – as this is the way they do their own home, and many other things in life. However, they may want to buy the next property in just one of their names – then that person will be assessed for half of the value of the old joint property and all the value of the new property – this may push them over the threshold and mean they incur land tax. Whereas buying one property in one name, and the next in the other partners name may have kept each of them under the land tax threshold. This is particularly important in high capital growth areas such as Masterplanned estates in the growth areas of Melbourne. Due to the pandemic and work from home mandates, many people have left the CBD and ‘spread out’ to these outer areas. This high demand in these entry level suburbs have pushed prices up for land very quickly.
Additionally, foreign investors need to also consider the name they put on the FIRB application. If there is a minor change (eg Common/English name vs Name on passport), then their solicitor can usually get this approved from FIRB, but if it is someone different eg the buyer’s child being substituted on the Sale and Purchase Agreement, then a new FIRB application (and fee) is required.
Resimax specialises in Masterplanned price controlled staged developments in high growth areas. It’s in-house builder, Tick Homes, specialise in efficiently building stylish, modern homes of the highest quality in Resimax estates. Customers buying through RGI can benefit from our unique ‘5/10/20 Guarantee’ of 5yrs capital protection, 10yrs rent guarantee, and 20yrs structural guarantee on Tick homes. RGI members receive early notification of projects well before public release.
Disclaimer: This article is for general information purposes only and should not be taken as advice. Always seek professional advice from suitably qualified professionals familiar with your situation and goals.
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Steven Molnar is Head of Research and Education for Resimax group. With over 25+ years in property and finance in Australia and internationally, he brings a unique perspective to each interview with interesting guests and property insights. Resimax group is one of Australia’s largest private property developers, Resimax Group Investor is headquartered in Kuala Lumpur MY.