My wife and I are buying my mums house from as she is downsizing. The transaction hasn’t taken place yet but will soon. We are already living there as she wanted to move out. Assume these factors: $1.5m total value. Already given her $0.5m (proceeds from sale of our old house which she has gifted to the other siblings). Will take out a mortgage for $0.5m (which will be used to buy a small apartment) and pay $0.5m to her over 10-15 years interest free. Exact details to be worked through on this but will look roughly like this.
Concerns are as follows:
– we had it valued last year and they came up with a value that we would like to use for the OSR for stamp duty purposes. I realise that OSR will require a reasonable valuation for stamp duty purposes so have accepted that (even if we bought it for nil). Its probably increased by 5-10% since then due to the stupidity of the Sydney property market. Are we at risk of them questioning our value? Is there a certain time that you have to have the transaction take place within to appease the OSR?
– The $0.5m she gets when we finalise the transaction will be used to purchase a new apartment/small house, and the repayments on the interest free portion will be extra funds for her over the next X years (approx $2k per month). I don’t want the $2k per month that we pay her in interest free loan to affect her pension but have a feeling that it might. Anyone got any thoughts on alternative ways to make this work?
– What is a good professional we can see on this? Im an accountant myself but not strong on personal tax/structuring estate planning etc
I note she is currently 59, and hoping to claim the pension once 65.
Any assistance you can provide would be appreciated.
There are number of complicated and technical issues here.
Yes the OSR will expect duty on an assessed market value and yes if your mother is likely to be on receipt of a centrelink pension then the assumed total sale amount will need to be assessed.
Definitely one not to be answered on a forum but time for some specific professional advice.
Could save you and her a reasonable sum going forward.
Cheers
Yours in Finance
Richard Taylor | Australia's leading private lender
Is your mum even going to be entitled to get the government pension?
I don't know a huge amount about the criteria but I can only assume that someone with a $500k house/unit mortgage free, $2,000/month passive income for the next 20 years plus $500k in the bank isn't going to be entitled to a whole lot. If the $500k is earning 5% she'd be looking at having a passive income close to $1,000/week.
I think the pension is meant for those that chose not to invest for retirement.
But yeah, as Richard said, best to get some professional advice.
Simon Plummer | SP
https://www.sp.com.au
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i agree with Richard. You need some good legal advice and possibly financial advice.
Stamp duty on $1.5 mil is a lot of money and there may be ways to keep things as they are and still each get what you want.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Plummer wrote:Is your mum even going to be entitled to get the government pension?I don't know a huge amount about the criteria but I can only assume that someone with a $500k house/unit mortgage free, $2,000/month passive income for the next 20 years plus $500k in the bank isn't going to be entitled to a whole lot. If the $500k is earning 5% she'd be looking at having a passive income close to $1,000/week.
I think the pension is meant for those that chose not to invest for retirement.
But yeah, as Richard said, best to get some professional advice.
There are 2 main tests for the pension:
1. Assets test
2. Income test.
A single person with a home can have up to $193k in assets other than the home and still get the full pension. They must also earn less than $4056 pa in income to qualify for the full pension.
The $2000 per month may not count as income if it is just repayment of a loan – but the loan amount would be an asset.
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
Terry thank you so much for your assistance. I do realise that it reads as though my mother is trying to rort the centrelink rules, but we are only trying to make sure we structure our affairs correctly. Would you recommend a property/estate planning lawyer or financial planner? I have zero respect for financial planners but maybe just havent found the right one.
djjk wrote:Terry thank you so much for your assistance. I do realise that it reads as though my mother is trying to rort the centrelink rules, but we are only trying to make sure we structure our affairs correctly. Would you recommend a property/estate planning lawyer or financial planner? I have zero respect for financial planners but maybe just havent found the right one.I think you need to find a lawyer. A planner may be able to advise on the centrenlink aspects but so can a lawyer – this is law afterall.
And there is nothing wrong with structuring things to maximise social security benefits,
Terryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
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