Hello Everyone,
Some advice please if you don’t mind. I have a friend who purchased a property for his Mother in the early 1980’s for her to live in as she had no assets and no disposable income (except the pension). She has lived there rent free (all rates, water etc paid for by her son) until now. It has come to the time when my friend needs to look at purchasing her a new home either in a retirement village or a smaller unit and my friend would like to understand how he can legally minimise the tax he pays on the new property if in the unfortunate event he has to sell for some unforeseen reason.
I initially suggested that he set up the purchase using a discretionary trust so that he could distribute any profit made to a number of beneficiaries and get the 50% CGT free claim if he holds the property for more than 12 months. But then I thought that maybe he could purchase it is his son’s name. Does anyone know if this is legal? His son is 12 years old. Does anyone know of any other ways he could purchase the property and minimise his tax? He owns the property he lives in in joint names with his wife.
Because he has been so generous with his Mother for all these years (i know I know she is his Mother) I would like to at least present him with a few different options to consider and so if anyone has any suggestions it would be greatly appreciated.
Also is the current property tht she lives in (and my friend own’s) exempt from paying CGT if it was purchased in the early 80’s? I knwo there is cut off date, just can’t rememver what it is.
Thanks for your help guys
KrsOriginally posted by krs:Also is the current property tht she lives in (and my friend own’s) exempt from paying CGT if it was purchased in the early 80’s? I knwo there is cut off date, just can’t rememver what it is.
Hi Krs,
Generally, there is no CGT obligation for assets acquired before 20 September 1985 (pre-CGT).
Given the set of circumstances you have described it sounds as if this property is a proverbial little gold mine.
Be wary of ‘selling’ this property to a trust (which is the best structure for your other part of the question) as it will create a CG event and make subsequent gains taxable.
Derek
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Skype – derekjones2113If the mum has no property, what about buying in her name? That way when sold, there will be no CGT. Check with an accountant on what effect this will have on her pension etc.
I beleive a 12 year old could own property, but cannot get a loan. Not sure of the tax implications tho. Children are generally tax at around 66% on income above a certain amount (approx $800 pa). So if the child does not live there the ppty may be subject to CGT. Again, better talk to an accountant about this.
Terryw
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Parramatta
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If the mum has no property, what about buying in her name? That way when sold, there will be no CGT. Check with an accountant on what effect this will have on her pension etc.Good point Terryw, my friend has explored this avenue but unfortunately it is not feasible at this time. Thanks for your help and suggestions guys, much appreciated.
Thanks
krs
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