Co‑ownership and tenants in common: safe ways to share geared property

Co‑owning a geared property can work very well in Australia – if the ownership split, the loan structure and the paperwork all line up.

In plain terms, co‑ownership with tenants in common means each person owns a defined percentage of the title and usually takes on that percentage of the loan, costs and income. Done properly, it lets couples, friends and family share buying power while keeping tax, estate planning and exit options clean.

But if the gearing and paperwork don’t match who really funds the property, you can end up with:

• ATO disputes over who can claim what
• family conflict when someone wants out
• refinance headaches because the bank hates the structure

This guide gives you a decision‑grade framework you can act on this week to structure (or tidy up) co‑ownership safely.

1. What “tenants in common” co‑ownership actually means

1.1 Tenants in common vs joint tenants – the practical difference

In Australian property law there are two main ways individuals can co‑own property:

• Joint tenants – each person owns the whole asset together. If one dies, their share passes automatically to the survivor (right of survivorship).
• Tenants in common – each person owns a defined percentage (e.g. 60/40, 70/30). If one dies, their share goes through their will or estate.

For geared investment property, tenants in common usually makes more sense, because:

1. You can match the ownership split to who really funds the deposit and loan.
2. Each person’s rent, expenses, interest and CGT calculation follows their percentage.
3. Estate planning and unequal contributions are easier to handle.

Under the 2026–27 tax reforms, the ATO is likely to scrutinise arrangements where the legal title, funding and tax claims don’t line up. That makes tenants in common, correctly documented, even more important.

1.2 How tenants in common interacts with gearing and tax

With tenants in common:

• Each owner is treated as holding their share of the asset.
• Each owner includes their share of rent and expenses on their tax return.
• Interest deductibility still follows loan purpose, not security, consistent with existing ATO views and our earlier work (see /insights/guarantor-family-pledge-loans-self-employed).
• On sale, each owner calculates capital gains tax (CGT) on their share only.

The new Budget measures on negative gearing and CGT discounts (commencing from 1 July 2027 for many residential properties) don’t remove these basics – but they do change how useful heavy gearing is, especially for high‑income investors.

For most co‑owners, the message is:

1. Get the legal ownership split right.
2. Get the loan splits right.
3. Make sure records and agreements support what you’re telling your accountant and the ATO.

2. Why shared geared property is getting trickier after tax reforms

2.1 The new negative gearing settings in a nutshell

Under the 2026–27 Federal Budget reforms (as summarised by CPA Australia and Treasury material):

1. For many new residential investments contracted after 1 July 2027, rental losses will be quarantined to rental income and related capital gains.
2. Existing, pre‑reform investments are likely to be grandfathered, meaning current rules generally continue for those specific properties.
3. The 50% CGT discount is expected to tighten for some investments, especially held via entities.

This means:

• You can’t rely on big tax refunds to bail out a weak, negative‑cashflow property.
• High‑income professionals in particular need to focus on pre‑tax cashflow and risk, not just tax outcomes (see /insights/high-income-professionals-property-tax-serviceability-guide).

For co‑owned properties this matters because:

• One owner might be on a higher marginal tax rate than the other.
• One might already have grandfathered investments while the other doesn’t.
• You could end up with different tax outcomes from the same property.

2.2 What this does to co‑ownership strategies

In the old world it was common to see:

• 99/1 ownership splits to load negative gearing to the higher‑income spouse.
• Parents taking a small ownership slice purely to soak up losses.

Going forward, strategies that rely on aggressive loss‑shifting through odd ownership splits are less attractive and more exposed to ATO scrutiny.

Most investors will be better served by:

1. Ownership percentages that reflect real economic funding.
2. Loan structures that trace purpose clearly – each dollar borrowed either home, investment or business (see /insights/using-investment-property-equity-support-alexandria-business-without-over-gearing).
3. Stress‑testing deals on pre‑tax numbers and higher interest rates (see /insights/how-leverage-really-works-property-small-deposits-big-risks).

3. Common co‑ownership scenarios – and what can go wrong

3.1 Couples buying an investment property together

Typical pattern:

• Both names on title.
• Shared loan, but one income is much higher.
• Mixed use of offsets and redraw over time.

Risks:

• Title 50/50 but one person really funds 80%+ of deposits and repayments – potential mismatch with tax and family law outcomes.
• Redraw used for personal spending contaminates deductibility (see /insights/common-debt-recycling-mistakes-accountants-see-and-how-to-avoid-them).
• No clear plan if one partner steps back from work or they separate.

3.2 Friends or siblings buying an investment together

Typical pattern:

• Tenants in common with unequal shares (e.g. 70/30).
• Jointly and severally liable on the loan.
• Shared offset or offset in one person’s name.

Risks:

• No co‑ownership deed. Disputes about who pays what, who can use the property, or when to sell.
• One party over‑borrows elsewhere, forcing a sale or refinance.
• Hard to unwind when one wants to buy a home or de‑gear before retirement (see /insights/degearing-large-home-loan-before-retirement-without-fire-sales).

3.3 Parents helping adult children into the market

Parents might:

• Go on title as tenants in common.
• Provide a cash contribution or secured loan.
• Offer a family guarantee instead of co‑owning.

As we’ve covered elsewhere, documenting whether parental help is a gift, loan, guarantee or genuine co‑ownership interest is critical (see /insights/structuring-family-assistance-children-expensive-markets and /insights/avoiding-family-conflict-agreements-documentation-exit-plans).

Co‑ownership can be smart, but only if:

• The parents’ estate plan aligns with the ownership and loan liabilities.
• Everyone is clear what happens if parents need to access equity for retirement or aged care.

4. Structuring tenants in common + gearing: the building blocks

4.1 Aligning legal ownership with real funding

A safe starting rule: legal ownership should broadly reflect who is actually funding the investment over the long term.

That doesn’t mean you need to match every dollar of cashflow, but consider:

• Who is providing the deposit (cash or equity)?
• Who will service the loan repayments in practice?
• Who will bear the risk if things go wrong?

If one party is:

• Contributing most of the deposit;
• Covering most of the repayments; and
• Reliant on the deductions;

…then a larger tenants‑in‑common share for that person usually makes sense.

4.2 Splitting the loan for clarity

Interest deductibility follows purpose of funds, not which property secures the loan. This is a consistent theme across many of our case studies (e.g. /insights/mascot-couple-upgrades-without-selling-first-unit and /insights/six-year-rule-main-residence-exemption-geared-properties).

For co‑ownership, it also helps to:

• Have separate loan splits for each owner where possible; or
• At least have a clear schedule showing what portion of the loan relates to each person’s share.

Example structure – friends buying 70/30 investment

• Purchase price: $900,000
• Costs (stamp duty, legals, etc.): $40,000
• Total: $940,000
• Deposit: $188,000 (20%) – Alex $131,600 (70%), Bella $56,400 (30%)
• Loan: $752,000 – ideally split Alex $526,400 (70%), Bella $225,600 (30%)

Alex and Bella own as tenants in common 70/30, and each pays and claims interest on their share of the loan.

4.3 Using offsets and redraw without contaminating deductions

Some rules of thumb:

• Prefer offset accounts over redraw for flexible cash without mixing loan purposes.
• Keep separate offsets for personal vs investment purposes where possible.
• Avoid using redraw from an investment split for personal expenses, as this contaminates the loan and can permanently reduce the deductible portion (see /insights/common-debt-recycling-mistakes-accountants-see-and-how-to-avoid-them).

When co‑owning:

• If you share an offset, agree who owns which funds and how withdrawals work.
• Consider each owner having their own offset linked to their loan split where the lender allows it.