Pre 1985 Asset and CGT

[Adzo99]

I'm about to purchase a property owned by my parents.
The property was purchased in 1981 and has always been a holiday house for them, so it has never derived an income.
This house in not their PPOR.

will the sale of this property to me be liable for Capital Gains Tax
Also can I rent the house out before it has been transferred into my name.
Will this impact the CGT?

I can't find info on this?
Any help would be appreciated

Thanks

 

[Terry_w]

Would probably be CGT exempt - even if renting out.

Once it is transferred to you it will be subject to CGT. Stamp duty on the transfer too. Considered keeping as is?

 

[MRO]

Please get professional advice.

In my unqualified opinion, there would be no CGT payable, regardless of rental situation.

 

[Scott No Mates]

Shouldn't be affected by cgt however is there the option of it being transferred to you upon death?

 

[Rob G.]

I'm about to purchase a property owned by my parents.
The property was purchased in 1981 and has always been a holiday house for them, so it has never derived an income.
This house in not their PPOR.

will the sale of this property to me be liable for Capital Gains Tax
Also can I rent the house out before it has been transferred into my name.
Will this impact the CGT?

I can't find info on this?
Any help would be appreciated

Thanks

1) Parents could be subject to CGT in unusual circumstances, a few examples:

Purchase land pre-CGT and build house post-CGT
Make substantial capital improvements post-CGT
Originally sole ownership but converted to joint ownership post CGT

2) "You renting out the house prior to transfer" suggests CGT event B1 occurring at the date you acquire use of the property.

This should not impact on any CGT for your parents if their interests are pre-CGT but you will have a market value cost base at that date.

"You" may have to reduce your cost base by any Division 43 capital works deductions that you may claim. That will need clarifying.

Similarly, "you" may be the holder of the depreciating assets. That will need clarifying.

There will be questions over who may be liable for land tax and whether any state duties occurring prior to transfer. That will need clarifying with state revenue.

Get a competent lawyer to advise, please don't skimp on a cheap conveyancer who melts away when unintended consequences arise.

 

[Paul@PFI]

Check if they have been liable for land tax too. Its not uncommon that its not registered but liable for tax if its near a beach. To sell to you a land tax clearance certificate may turn up a surprise. Something for a lawyer to check.

Of course you would buy from them at any price but OSR would need a valuation to confirm value as stamp duty is assessed to you as buyer on market value rather than a lesser agreed price. (Ie a $1m property for $1 is dutiable on $1m) For your CGT purposes the market value is your CGT cost base not the $1 paid (example)

Also if parents have any future pension etc entitlements this sale could affect them so seek financial advice on those consequences if it is relevant. ie gifting, assets test etc... This could even affect them if they later seek age care