Can You Co-Own a Property Without Going 50/50?

When friends, siblings, or even couples buy property together, the assumption is often that the ownership must be split right down the middle. In the world of Australian real estate, this is a common misconception. While a 50/50 split is the "default" for many, it is certainly not the only way and for many investors, it isn't the smartest way either.

Whether you are pooling resources with a business partner or a family member, you have the legal right to slice the ownership pie however you choose.

Here is how you can structure unequal ownership and why it might be a game-changer for your tax and estate planning.

Tenants in Common: The Key to Unequal Shares

To own a property in unequal portions, you must register the title as Tenants in Common. This is the alternative to the more traditional "Joint Tenancy" used by many couples.

Under a Tenancy in Common arrangement, you can specify exactly what percentage each person owns. It could be 70/30, 99/1, or 60/40. These shares are usually determined by how much each person contributes to the deposit or the ongoing mortgage repayments.

Unlike a Joint Tenancy, there is no "right of survivorship." This means if one owner passes away, their share does not automatically go to the other owner. Instead, it forms part of their estate and is distributed according to their Will.

Why Investors Choose Unequal Splits

The most common reason for an unequal split is tax effectiveness. In Australia, the ATO generally requires you to claim rental income and expenses in proportion to your legal ownership of the property.

If one partner is a high-income earner and the other earns significantly less, a 90/10 split might be strategically used. If the property is "negatively geared" (costs more to run than it earns), the higher earner can claim 90% of the tax losses against their high income. Conversely, if the property is cash-flow positive, you might put the larger share in the name of the lower-income earner to reduce the overall tax bill on the profit.

The $600k Property Example

Imagine two siblings, Sarah and Tom, buying a $600,000 investment property in Victoria. Sarah has been saving for years and contributes $120,000 toward the deposit, while Tom can only chip in $30,000.

Instead of a 50/50 split that ignores their initial contributions, they register as Tenants in Common with an 80/20 split.

• Sarah owns 80% ($480,000 value)

• Tom owns 20% ($120,000 value)

This ensures that when they eventually sell the property, the capital gains are distributed fairly based on what they actually put in. It also protects Sarah’s larger initial investment if they ever decide to part ways.

What Happens to the Mortgage?

It is important to note that while the ownership can be unequal, the liability usually isn't. Most Australian banks will require both co-owners to be "jointly and severally liable" for the loan.

This means that even if you only own 10% of the property, the bank holds you 100% responsible for the mortgage if your partner fails to pay. Lenders don't care about your internal 90/10 split; they just want the full monthly payment on time.

Things to Consider Before You Sign

Buying in unequal shares adds a layer of complexity to your purchase. You should consider the following:

• Stamp Duty: In most states, stamp duty is calculated on the total purchase price, regardless of how you split the ownership.

• Land Tax: Owning a larger share of a property might push you over the land tax threshold in your state faster.

• Future Sales: If one person wants to sell their 30% share but the other wants to keep the property, things can get messy without a clear co-ownership agreement.

The Importance of a Paper Trail

Because Tenancy in Common involves distinct shares, it is highly recommended to have a legal "Co-ownership Agreement" drafted. This document acts as a manual for the investment, outlining what happens if someone wants to sell, how maintenance costs are split, and how disputes are resolved.

Structuring your ownership correctly from day one is far cheaper and easier than trying to change it years down the line.

Keen to understand how this applies to your situation? We’ll help you break it down and plan the next step.

Disclaimer:

The information in this article is general in nature and does not take into account your personal financial, legal, or tax circumstances. Property structures, tax regulations, and superannuation rules may change over time. You should seek advice from a qualified professional and refer to the latest ATO and government guidelines before making any investment or structuring decisions.