Hi there,
Hoping someone out there may have resolved a similar situation. My elderly Mum is moving from her home (fully owned) into our granny flat and will be paying us rent to compensate for the rent we're currently receiving from a tenant.
She's a pensioner as is my Dad, who's now in a nursing home.
What should we do with her house? Do people usually sell at this point or do they rent the house out – either choice will no doubt result in a drop in (or end to) receiving the pension as a result of the capital gain.
I have six siblings who will eventually share in the proceeds from the house sale once our parents pass away.
I would love to buy the place (it's an easy renter + has development potential) but feel it would be stretching us at this point and I would have to pay fair market price because of siblings also having a stake in the property's value. I'm not keen to go into any JV with siblings.
Any guidance here most appreciated.
cheers,
CarlinA couple of things to consider, selling the property will affect the asset test for your parent's pension. Renting the property out will directly affect their pension (however they may be getting more income) and also be able to take advantage of the 6 yr rule for the PPOR. It may be a pertinent time to see a) Centrelink b) a financial planner c) your accountant d) estate planner etc to decide how best to move forward.
Hi carlin.
I think you need to see a specialist lawyer/financial consultant. They can help maximize your parent's
income and options. As one parent is in a nursing home and your mother may require something similar at some stage,
it is prudent to hang on to the house as the funds may be needed to pay for this. This is what my family are doing. You would also be avoiding any decisions involving all those siblings! If your mum is able to be involved in this planning that would be ideal.Good luck.
G
Thanks for tips. Getting advice is where I get stuck…..I don't know who I should talk to for financial advice on this one. Centrelink won't give advice, understandably. Is there a particular kind of financial advisor I should see or do I just lookup the yellow pages, shut my eyes and poke a pin in to choose one???
We're in Adelaide so if anyone has any recommendations of someone here I'm keen to read them.
Carlin
Go to a accountant, but make sure he knows what he's doing, someone on this forum may have a good accountant they can refer you to.
Go to a accountant, but make sure he knows what he's doing, someone on this forum may have a good accountant they can refer you to. or go to nayler and chan there should be an office near you
carlin wrote:Thanks for tips. Getting advice is where I get stuck…..I don't know who I should talk to for financial advice on this one. Centrelink won't give advice, understandably. Is there a particular kind of financial advisor I should see or do I just lookup the yellow pages, shut my eyes and poke a pin in to choose one???We're in Adelaide so if anyone has any recommendations of someone here I'm keen to read them.
Carlin
Hi Carlin,
I'm an accountant based in Norwood. If you'd like to have a chat, our office number is 08 8363 2233, and ask for Daniel.
One other option, to add to the list. If you leave the property vacant (ie – don't rent it out) it will be free of CGT forever, not just the 6 years as someone mentioned in a previous post.
All the best,
Dan
That would be stupid to leave it vacant when you can collect an income from it, plus you could easily get a couple of valuations done and keep the highest valuation and if you sell in a couple of years then pull out that valuation when someone comes knocking and then there will only be tax between that valuation and the sale price, but if the valuation is higher than the sale price then there should be no tax to pay
We're planning to talk with someone next week.
However, on the idea of getting a couple of valuations done…..I'm not clear how getting a valuation done can save us from having to pay CGT. If the property ceases to be Mum's PPOR and is instead rented out for a period then isn't CGT payable on its sale and – if so – how is it calculated?
thanks for ongoing help with this.
Carlin
Basicly lets say for an example this property is worth $500,000 today and your mum sells it today then there is No CGT as this is your mums ppor but lets say you lease it for the next 2 years and then you decide to sell it and it sells for $600,000 well then the first $500,000 is free from CGT because this is what it was worth before your mum started to lease it and you will then pay CGT on the $100,000
2nd example
Now lets say you get 3 valuations in total because your not happy with the first 2 as you think your mums house is worth more than the first 2 valuations
value 1 $495,000 value 2 $520,000 value 3 $570,000
Now your happy with value 3 at $570,000 so you keep this valuation handy and when you sell in say 2 years and lets say the sale price is $600,000 then your going to pay tax on $30,000
lets say you sell in 10 years and you get $800,000 well then you will pay tax on $230,000Thanks Keiko….very clearly explained and I will follow this advice and organise valuations before we rent it out…..which I think is the likely path we'll take.
keiko wrote:That would be stupid to leave it vacant when you can collect an income from it, plus you could easily get a couple of valuations done and keep the highest valuation and if you sell in a couple of years then pull out that valuation when someone comes knocking and then there will only be tax between that valuation and the sale price, but if the valuation is higher than the sale price then there should be no tax to payAs it is your mum's house, she would be the one earning the rental income. You would need to check how this affects her pension, and whether the house would still be an exempt asset. It's not simply a matter of renting it out to earn income, instead of letting it sit vacant. Your mum could easily be worse off if it is rented. You would need to check with Centrelink as to how her pension is affected.
We have explored the similar situation with our 90 yrs old grandfather, and we decided to let the place remain vacant, we checkon it every week and have a mowing man attend to it 1 per month. The issue is if you rent it out and then your mum gets ill or needs to go to a home, you may need to sell the home to fund her nursing or any care required or special services/ nursing home bond or purchase a little unit and it may not be possible to sell easily if tenants are in the property or only 2- 3 months into a 6/ 12 month term, also we did not wish to run the risk of any damage, repaint/ M/ Repairs to the property if there was any tenant damages. Also the extra income could effect the pension and entitlements to certain care/ benefits. So the extra income of 200- 300 per week was not really an incentive for our family, it was more the convenience, keep the home non damaged, and not effect the health and pension benefits.
We also took the approach that it was our time as a family to care for our grandfather and so be it if we are loosing on rent money, it is not all about money – it is providing the best care and options possible and not effecting their pensions/ health benefits and if you need funds asap for special care it is a nightmare to sell with tenants in, tenants would get pissed off if house getting sold/ inspections after being there a few months and it was best to keep the home in mint condition, plus also you will find that your relative may get very upset if they cant sometimes go back to their home to potter about or check it or visit for memories sake, so there are many many areas you must consider and we put the financial side last of the rent and their needs first, plus did not wish to effect any benefits.
carlin wrote:this is a common situation and a potential minefield because of all the complexities around the issues.
please get expert professional advice before taking any further action.have you spoken to all your other family members potentially effected by this situation?
has your mother still got full capacity to make legal decisions?
have you spoken with a Financial Information Officer from centerlink? they do not give advice but can point you in the right direction, and certainly tell you what any decisions you make and how those decisions may impact your parents financial position with centrelink.as you maybe aware govt funded aged care like nursing homes, high care and low care facilities assess income and assets and this impacts on fees and charges. homeowners are considered differently to nonhomeowners. it is very complex.
making the wrong decisions will be expensive. there are some experts in this area. contact SENIOR INFORMATION SERVIVES in adelaide. it is a govt funded agency that can give you independent information and may be able to refer you to someone who can help in your decision making.
well meaning families can find themselves in a lot of conflict in this area, especially from other family members.
please get expert advice asap.
regards.Hoping someone out there may have resolved a similar situation. My elderly Mum is moving from her home (fully owned) into our granny flat and will be paying us rent to compensate for the rent we're currently receiving from a tenant.
She's a pensioner as is my Dad, who's now in a nursing home.
What should we do with her house? Do people usually sell at this point or do they rent the house out – either choice will no doubt result in a drop in (or end to) receiving the pension as a result of the capital gain.
I have six siblings who will eventually share in the proceeds from the house sale once our parents pass away.
I would love to buy the place (it's an easy renter + has development potential) but feel it would be stretching us at this point and I would have to pay fair market price because of siblings also having a stake in the property's value. I'm not keen to go into any JV with siblings.
Any guidance here most appreciated.
cheers,
Carlinthat reply got mixed with my comments.
hope this helps.
regards.Many thanks for all the advice received here. I will be pursuing all the suggested avenues for getting solid financial advice on what to do here.
Yes, Pully, I am in discussions with siblings and also yes, my Mum is still fully with it.
So all decisions will be made in consultation with Mum and siblings to ensure we stay a happy family.
cheers,
Carlin
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