Can you give a house?

[mcwrangler]

The reason I ask is that my mother is nearing retirement and the kids are basically all out of the house. She's got a double storey 5 bedder which is very empty. Can she sign the house over to myself or my sister without actually selling it? If so, what are the tax implications and/or costs?

I know I'll have to talk to my solicitor but is there anyone else in particular?

Any help will be greatly appreciated!
Cheers!

 

[Aaron_C]

Transferring title is considered a 'sale' or 'transfer'. If it's her own home she may not have to pay any capital gains tax, but she will probably have to pay stamp duty on the transfer unless there is an exemption in your State.

 

[Player]

If she will be seeking retirement assistance from Centrelink, there may be gifting implications. You need to contact them as relevant.

Will she still be living in it at all?
Will you and/or your sister be leasing it out?
Might the title go into both names? If so, do you want joint tenants or tenants in common?
Is your mother moving into smaller accommodation? If so, does she have funds to do this without any proceeds from the disposal of her home?
What is the rationale of removing this from her peronal name?

If it was her PPOR, CGT should be exempt, however stamp duty will be paid at "market value" You may need an official valuation or at the very least witten appraisals from a couple of real estate agents.

You need to sit down with a fin planner and/or Centrelink to assess the various options available and be clear with your intent as to what you hope to achieve by doing this.

 

[jrc77]

Transferring title is considered a 'sale' or 'transfer'. If it's her own home she may not have to pay any capital gains tax, but she will probably have to pay stamp duty on the transfer unless there is an exemption in your State.

Surely the recipient of the house would have to pay the stamp duty?

 

[ozmale42]

The reason I ask is that my mother is nearing retirement and the kids are basically all out of the house. She's got a double storey 5 bedder which is very empty. Can she sign the house over to myself or my sister without actually selling it? If so, what are the tax implications and/or costs?

I know I'll have to talk to my solicitor but is there anyone else in particular?

Any help will be greatly appreciated!
Cheers!

The way I understand it, unless it's transferred from a deceased estate or in accordance with an order of the family court stamp duty will apply (depending on your State) based on market value..

The CGT clock will start ticking for you from the date of transfer with the acquisition cost deemed to be the market value at that time.

 

[marg4000]

If you mother has even the slightest intention to claim Centrelink benefits within the next 5 years, then there will be serious implications if she gives away an asset (or sells it below market value). If the decision is made to go ahead, I feel the ones receiving such a generous gift should pay for independent legal and financial advice for your mother so that she understands the full implications.

Yes, we never think it will happen to us, but there are enough horror stories of elderly parents being evicted from a home they gifted to an adult child.

I know personally of one sad case where the gifted property (value around $500K 15-20 years ago) was caught up in a business failure and the elderly parents are now living in very basic Government housing and existing on the pension.
Marg

 

[mcwrangler]

Thanks for the quick and informative replies.

The house is worth 650k and yes I would be forking out the stamp duty.

My other question is, if she moves out of that house and I rent it out, can she be my tenant in one of my other IPs? Is there a law that prohibits leasing to family members?


Cheers!

 

[Propertunity]

My other question is, if she moves out of that house and I rent it out, can she be my tenant in one of my other IPs?

Yes, but you must charge her market rent to be able to claim 100% of the associated expenses.

Is there a law that prohibits leasing to family members?

No, not yet.

 

[virgo]

Kids and inheritance

Where i come from, there is a court ruling that you can sue your kids for maintenance (there is no state pension)

 

[weg]

Thanks for the quick and informative replies.

The house is worth 650k and yes I would be forking out the stamp duty.

My other question is, if she moves out of that house and I rent it out, can she be my tenant in one of my other IPs? Is there a law that prohibits leasing to family members?


Cheers!

Obviously if you don't borrow against this house (being a gift to you) and you rent it out you'll pay tax on almost all of that income, unless you have other heavy losses to offset this.

Also regardless of whether your mum pays you rent or not (or pays rent at below market) in an IP of yours, you will still pay tax on it's market rent.

Oh, and what marg4000 said... if she is thinking of accessing Centerlink or even entering care in the next 5 years this would probably have serious implications.

Even if not giving it away, and down the track she wants to access the pension, she can't just move out, rent the place, and move into one of yours, without implications.

 

[Terryw]

Having you considered leaving it in your mum's name and acquiring it down the track via her will? Plenty of tax and stamp duty and CGT advantages. also asset protection advantages, and possibly family law advantages.

Of course this would mean you couldn't borrow against it and leverage.

 

[Sunfish]

Why not sell the house on the open market and then take professional advise on what to do with the proceeds to minimise impact on centerlink benefits? You have IPs so you cannot claim hardship and ask for her help.

She then pays you market rent out of the proceeds.

You have not compromised your investments. She is still independent. ATO and Centerlink are happy. As time goes by she can gift out any excess cash at bank as she sees fit.

I'm with Marg and give your mother's welfare absolute top priority. Don't put her best interests at risk so you can nickel and dime the government. You're a big boy now.

 

[kathryn d]

No offense to the OP, but why does it seem everyone wants to do whatever they can to get that almighty Centerlink?

If the mother used the rental income for herself while she is alive, she would still be entitled to part pension?


I never plan on relying or going after any Pension when I'm of that age.

 

[devank]

How about buying the property for $750k?
You give the market value of 650K to your mum.
Advantages:
1. Hopefully a friendly bank takes the contract price as it's value and gives you the 80% loan of 600K.
2. Say you are selling the property for $850 sometime in the future.Then your CGT would be only on the 100K.

I could be totally wrong here

Having said that I totally agree with kathryn. At the end of the day, tax payers (all of us) are paying the pension!

 

[pennyk]

how many children are there...... will any of them be getting an advantage over the others?

 

[Terryw]

How about buying the property for $750k?
You give the market value of 650K to your mum.
Advantages:
1. Hopefully a friendly bank takes the contract price as it's value and gives you the 80% loan of 600K.
2. Say you are selling the property for $850 sometime in the future.Then your CGT would be only on the 100K.

I could be totally wrong here

Having said that I totally agree with kathryn. At the end of the day, tax payers (all of us) are paying the pension!

Wrong on both accounts.

The bank will lend on lesser of contract price or value. With a sale without an agent involved they are likely to be more stringent with their checks too.

CGT would be based on market value.

 

[weg]

No offense to the OP, but why does it seem everyone wants to do whatever they can to get that almighty Centerlink?

If the mother used the rental income for herself while she is alive, she would still be entitled to part pension?


I never plan on relying or going after any Pension when I'm of that age.

I mentioned Centerlink because the OP hasn't mentioned any other assets AND she's near retirement. If she gifts the house she could end up with no asset and no pension.

As the house is a PPOR, and assuming she has no other assets, why would she rent it out (and get only a small pension only for doing it) and pay rent elsewhere?

How would she be better off?

 

[Aaron_C]

No offense to the OP, but why does it seem everyone wants to do whatever they can to get that almighty Centerlink?

If the mother used the rental income for herself while she is alive, she would still be entitled to part pension?


I never plan on relying or going after any Pension when I'm of that age.

Well said kathryn. It baffles me as well why people go to so much effort so that they can get a government handout that barely covers living expenses.

 

[wylie]

The OP's mother might not have much else and her options might be the pension... or nothing much else.

So, I think it is prudent to check with Centrelink about whatever happens with her house. Too late once the sale or transfer is done to think "what if?"

And even if someone is entitled to $1 per fortnight in pension, it is the other benefits that come with it that many are interested in. Self funded retirees not only don't get any pension, they don't get most of the other little benefits.

Self funded retirees possibly don't need those things, but they have paid taxes all their lives (more than most people who will get a pension) and miss out all around. If I was close to being able to get even $1 a fortnight, I would try to ensure I got it, just for the other benefits.

 

[devank]

The bank will lend on lesser of contract price or value. With a sale without an agent involved they are likely to be more stringent with their checks too.

How about an auction with yourself (son), your friend and general public?

CGT would be based on market value.

Current market value is whatever the comes out the auction. Future market value is what ever the price someone else pays in say five years time. CGT paid for only the difference. So if the current value is inflated then the difference is going to be smaller.