Do I need to pay CGT?
It was and investment property 8 years ago when I was collecting rental income from tennants and then my son moved in rent free. I would like him to receive his inheritance early.
Is stamp duty still payable on the transfer of ownership?
Would I still be up for CGT?
I have never lived in this investment property. I live in VIC.
If you have had any dealings gifting property to a relative please share your experience and if there is anyway around the above mentioned taxes.
Can't have people reading the ATO website for the most basic of advice now
Just goes to show that you can have any level of intelligence and still own an investment property in Australia.
Does that also mean the cost base for the person receiving the gift is market value as well? Though I recognise I this specific case they would likely get the PPOR exemption.
Just goes to show why the Australian government loves riding the wave of property house growth.
Makes money from Stamp duty
Makes money from rent
Makes money from capital gains
And soon will make money when you die and pass it to your kids.
HOW GOOD.
And soon will make money when you die and pass it to your kids.
I don’t have an issue with this. We have an imbalance of inter generational wealth. And if you’re gonna introduce a new tax I’d much pay it when I’m dead rather than alive…
Logic fail.
Old people have too much money.
Old people want to help young people.
It's ok to tax the living daylights out of that process to address the old people having yoo much money
Young people get what?? 🤦♀️
Young people get what??
The benefit of lower taxes than they would otherwise pay if the taxes weren’t collected from the older people. I’m not sure why you would overlook that.
@mskeggs: Haha!
Thats not how taxation works
Look at the UK who are about to abolish inheritance tax and why we did it. It is not a tax that lifts people out of poverty or redistributes wealth.
@Benoffie: I think you are making the case that increased tax revenue will mean increased government spending? But increased spending on government services benefits people.
Are you against all taxation, or just inheritance taxes?
Oh i'm in agreeance though. The intergenerational wealth divide will continue to grow. Those with houses will continue to keep those without houses away from home ownership. The amount of lifetime wealth subsidies that those with houses have benefitted from have to be recouped somehow. Sure, PPOR's should remain untouched, although i'm all for taxing investment properties.
The amount of lifetime wealth subsidies that those with houses have benefitted from
What are these lifetime wealth subsidies?
Yay, get to work and pay tax my whole life, on anything and everything, then pay more tax when I die. Just super.
Nah not just super. Inheritance tax should cover the whole estate.
Yeah nah
The people who have the most wealth won't get stung by this at all
You realise the government is a reflection of the public through voting. We literally own it.
Its moreso becoming a reflection of lobbyists, we like to think we have a say but its the ones with money that are pulling the strings.
Lobbyists only have a single vote each they are people too.
@deme: Crown only continued to operate even after being found guilty of money laundering because the lobbyists threatened the government that there'd be 4000 odd people unemployed on the dole.
But yeah the influence is more widespread than we'd believe
Now thats lobbyists.
Yes, we have the choice of two things, that are basically the same. Such a great choice.
Dumb, we have preferential voting unlike USA.
@brendanm: Then it's the people at fault.
You realise besides the fact you fell for the "labour is just like the liberals am I rite" meme you can vote for other people?
@deme: I don't vote for either of them, yet here we are with the same result as always. Rampant immigration and zero fs given about the Australian people.
@deme: Indeed, as I said, we are stuck with choosing between two thinks, both of which are too similar.
@brendanm: Are you AI?
https://www.ozbargain.com.au/comment/14896570/redir
you can vote for other people
@deme: Of course you can vote for other people. Unfortunately, your single vote has almost no effect, so the cycle of liblab continues, ad infinitum.
@brendanm: If the brendanm party got the majority of the votes would that fix it or are you corrupt?
@deme: I'm not corrupt, but also have no interest in being in politics. If I did, I don't think people would like it, as I don't agree with government being in every facet of people's lives, they should be there to provide necessary services, health, education, emergency services etc. I sure wouldn't have privatised power and water assets, and wouldn't have immigration solely to increase GDP at the expense of quality of life for people currently living here.
At any rate, the point is simply that it always ends up as liblab, and they always do roughly the same things, with no thoughts past getting elected at the next election.
@deme: Whoever is wanting smallest government, less religion etc, with liblab 2nd and 3rd last, greens last. I'm under no impression that it matters at all though, just makes me feel slightly better putting them at the end.
@deme: Honestly can't remember, as it simply doesn't matter. I check out the parties coming up to the election, then vote, then forget about it, as the result is already set.
@deme: I would have to research and get back to you. However as I've said, it doesn't matter, as we will only end up with liblab anyway.
@brendanm: What if everyone voted for the people who you want but refuse to disclose? Or do you only vote for them?
@deme: I don't refuse to disclose, I couldn't care less about disclosing. Everyone won't vote for whoever I vote for, as the vast majority love voting for one of the two majors.
@deme: https://www.ozbargain.com.au/comment/14897032/redir
It doesn't even matter who it is. Unless I vote liblab, there is an almost zero probability of anyone I vote for being elected.
@deme: See https://www.ozbargain.com.au/comment/14897032/redir
It's like saying I refuse to disclose how to perform nuclear fusion on earth.
with liblab 2nd and 3rd last, greens last
Why is being anti "liblab" something worthy in its own right?
Both the LNP and ALP are better than a whole host of minor parties, including fringe lunatic religious parties (which contradicts your point of wanting "less religion").
@p1 ama: Agree with you there, I absolutely despise the Libs but I'd place them higher than the right wing/religious nutjobs present in the last election.
@p1 ama: Simply because no matter who I vote for, it is not going to change the result. It simply makes me feel slightly better putting them last.
Simply because no matter who I vote for, it is not going to change the result.
What do you mean by who you vote for? You do not vote for any particular one candidate, as we have preferential voting, so your vote will flow down the order you've put.
So essentially, if the two party preferred is ALP vs. LNP in your electorate, then whichever one of those parties you preference higher will get your vote. This means that your vote can influence that result.
And soon will make money when you die and pass it to your kids.
To be fair, if there's one group of people who should most definitely get taxed more, it's dead rich people.
Nothing wrong with taxes. It's what the money is spent on, that is the problem.
And soon will make money when you die and pass it to your kids.
[citation sorely needed]
How about we just set a threshold or two?
1. "Death Tax" kicks in only on the value of an estate over $xxM.
2. "Death Tax" doesn't apply to your spouse/partner of > xxmonths.
Lets say:
1. Estate value of say $5M before any taxes are leveraged.
2. Spouse or Partner of > 24 months covers most legitimate circumstances
No.1 means that the vast vast vast majority of people will never be impacted.
No.2 means that your partner (and any children that still might be living at home) aren't impacted by some huge tax due to some untimely death.
By all means, please argue over the numbers but this sort of construct would impact the holders of massive intergenerational wealth, but not the average people.
Of course, since we don't tax gifts, it's easy enough for a parent to gift the family company/assets early so maybe there needs to be a rule that says the estate includes any gifts in the last xx months for the purposes of calculating the tax.
Plan B: How about a wealth tax? This one takes a % of your net worth each year. Again with a stupidly high threshold so as not to affect the normal people. Let's say 2% on net worth over $100M? More money than most of us will ever see in a lifetime (or two or three or four).
Yes, my parents bought a house, decided not to move into it so I moved in. They never lived in it and had their PPOR so the house I was in was classified the same as investment. I had to pay stamp duty, and they have to pay the CGT. They 'sold' it to me at a low rate, but a transfer would be the same for Landgate to do their valuation - this is a lot lower than the actual sell price, this is in WA, not sure about over east.
Lol OK salty ass person that negged me, could have at least given your reason
Sadly gotta get used to it on here. Any mention of having an investment property seems to get the have not crowd's nickers in a twist. Apparently working hard and buying an investment property is seen as being greedy and just un-Australian. Apparently all investors should just hand over their property to anyone who dont have a house.
It wasn't even an IP lol, the market was really bad at the time for selling so they didn't get what they wanted for their PPOR. the house they bought was better than mine, so we moved in while I rented mine out. I would have lost $100k if I sold that time. Wild that people think others should lose money to fit their mindset. But yes I do see that mentality you mentioned a lot. Talk so much about capitalism but want things like communism lol
Do I need to pay CGT?
Yes. If you are transferring the property ownership and it is not your principal place of residence, then it will trigger a CGT event. The amount of tax payable would be dependent on the market value at the time of transfer
Is stamp duty still payable on the transfer of ownership?
Yes. It is a transfer of ownership which will trigger a stamp duty (now transfer duty) event, based on the market value of the property.
if there is anyway around the above mentioned taxes.
Death & Taxes. There is no inheritance tax in Australia, CGT is not payable within 2 years of selling an inherited property.
The final point is incorrect, there absolutely is CGT payable within 2 years of selling an inherited property in Australia, there is however a carry over exemption for 2 years of the main residence exemption of the deceased.
You are correct
Parents should consider placing you on the title with them. This wouldn't trigger a CGT event afaik?
"afaik"
If course it will, you need to proportion ownership.
Yes but that could be for $1.
There will be stamp duty but no sale. It's an LTO change within family.
No, the portion transferred, irrespective of price would be subjected to CGT.
Stamp duty needs to be based on at least fair market value too.
As you need TAX advice, speak with your accountant.
The accountant will just ask OzBargain
I thought the site was now called OzAsk
Your son should just get a better job that pays more and buy his own house. I never got a hand out from my parents. I had to work hard and save for years to get a house.
And no I'm not a boomer, in fact my parents only just scrape into the boomer era.
I assume you plan to donate any inheritance you receive?
There won't be much to inherit as contrary to popular belief not all boomers are millionaires.
But you would still keep the money right?
My point is while a good work ethic is great, there is no reason to turn down free money (assuming OP has plenty of cash and won't impact them). I never got a free house, but if I did I would be retiring early and spending more of my life doing things I enjoy.
@Aureus: I'm already semi retired. The money I'd inherit would make little difference to my life, I'd most likely gift it to my younger siblings.
I’m leaving my other 3 investment properties to my dog. Should see how upset my daughter is.
Why not open a shared trust with you and your son. And you will contribute a property to the trust.
Still liable for stamp duty and capital gains tax. Would be better off signing an agreement that the son can live there forever, but this would still incur land tax as it's treated as an investment.
You’ll be liable for CGT, so take the hit and bequeath the property now. Your son will still benefit and get the certainty of home ownership years before he otherwise would. Then any capital gain he accrues will be CGT free as he is the principle owner. There's so much upside and you're in a privileged position. Pay your taxes and move on. Your choice is to pay it now while you're alive to assist your son or he'll pay it later when you're pased.
You should do this at least 5 years before you apply for the aged pension.
as people have said before. Yes and Yes from personal experience. as for tips:
find a good solicitor and explain the situation, they should be able to put you in touch with a valuer who will low ball the valuation to minimise the transfer price (i.e. get it as close to land value as possible).
whilst its a significant cost to pay, I wouldn't be too fussed about CGT, given it would be payable at some point (i.e. if your son sells the place down the line, his CGT will be based on the revalued amount anyways), but stamp duty is money down the drain for an early inheritance.
Check to see if you have any unused super contributions as you could then offset the CGT by making sizeable contributions to your super fund (taxed at 15%), thus reducing your normally taxable income.
my 2c (ofc each family situation is different), but get your son to pay for the CGT/SD.
Hopefully he can borrow in his own right, but otherwise once the house is transferred to him he would be able to leverage the property to borrow back on it and pay you back (leaving you even) and pay it back on his own accord. a free gift is usually an ungrateful one.
I wouldn't transfer it to my son early.
Why not just leave it in your own name until he is older and can afford his own place?
If you transfer to your son now you will incur CGT, and he will have to pay stamp duty.
If you want until you are deceased, and transfer as part of your estate, you potentially negate both of those as the beneficiary will inherit your cost base on the property, making the CGT his problem upon sale. There are also stamp duty concessions on transfers of property from an estate to a beneficiary, however it varies by state/territory.
Estate planning can be highly beneficial, so as others have advised, see an accountant to discuss the tax implications, and a lawyer to discuss proper structuring.
“If you sell, transfer or gift property to family or friends for less than it is worth, your capital gains tax (CGT) is based on the market value of the property.”
https://www.ato.gov.au/individuals-and-families/investments-…