It is the season for gift giving. Are you considering jointly buying a house with family members to help them get a foot into the property market?
If so you need to consider the capital gains tax (CGT) implications before entering the arrangement.
Sometimes parents take joint equity in a property where their children live. This means that the parents and the child are joint owners of the property but only the child and their family live in the home.
If the property ownership is passed solely to the child at any point, only the parents pay capital gains tax. The child escapes a CGT bill as it is their principal place of residence but for the parents it’s deemed an investment.
The CGT will be determined based on:
• the percentage ownership the parents have in the home
• the increase in the value of the property and,
• the amount of capital the parents contributed when purchasing the property
This can result in a significant tax bill for the parents without the funds from a sale to pay it.
If you are considering helping adult children purchase a home now or in the new year, speak to our accountancy and tax experts to get the right advice. Call for an appointment today 1300 118 618.
