Hello all,
We would be very grateful if someone could clarify the below queries for us, please:
The family house is in my Mother's name. This is her only home. However, I borrowed the money from the bank and repaid it. The home has been repaid. It is the norm in my culture that the children buy (and pays for) the home for their parents if the parents are financially much poorer. There are 3 bedrooms in the house and 3 family members occupying it: Mum, my brother and I. My brother receives Rent Assistance from Centrelink. On the centrelink form, I completed it that my brother pays board (not include meals) for $160pw to me as the landlord since settlement of the house and that my Mother and I pay nothing. Similar homes in the area rent for approx $600pw.
1. Will my Mother lose her main residence CGT exemption when she sells the house because the house has been earning income from my brother since the date we 3 moved in. This is main worry.
2. Should I have declared the $160pw as income on my tax return? This is not my main concern, as I am happy to back-pay the owed-tax if I was in the wrong.
But losing the main residence CGT exemption on the only home that I intended to be for my Mother's enjoyment is going to be a bit hit to us all. Is there anything that I could do to reclaim the main residence CGT exemption status for my Mother, please?
Thank you all.
JennyJenny,
Because it is a family member the ATO may consider it board and lodging and not being rented per se.
I'm sure a forum member who knows for certain will answer your query shortly.Hydra
Thanks, Hydra.
That was what I had been told – "it is a family arrangement and therefore not considered as income". And this is the reason why I haven't been including it in my tax return. But this omission is not as important as I don't mind back-paying the tax that I supposedly owed (my family came to Austr empty-handed. The citizens here and the Govt assisted our family a lot when we first arrived and thus I never thought about tax-saving. Paying my due tax is a form of repaying back to Austr). But what really concerns me as mentioned above is the possibility of losing the capital gain exemption on my Mother's home.I picked up a really good book "Savings Tax on Your Property Investment" written by Noel Whittaker and Julia Hartman, referred by Kenny (a forum member here). The book mentions about losing CGT exemption on the main residence if it earns income from day 1 (I never knew this fact) and it worries me since.
Thanks again.
JennyJenny talk to the ato and centrlink as my friend has boarders (not family members) and she was told by centrelink that they did not see this as income that she recieves from them as she also provides meals. The best advice would be to talk to the authorities involved. good luck Sonya
You say the house is in your mum's name, but you borrowed from the bank. Are you on title too? – not that it matters.
Board is not considered income – if it is only contributions for food, electricity etc
see para 17 of Tax ruling IT 2167 http://law.ato.gov.au/atolaw/view.htm?docid=ITR/IT2167/NAT/ATO/00001But your brother is claiming rental assistance. If you told them that this is just for board, then I think it will be ok.
I don't think your mum would lose the main residence exemption from what you have written.
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
Thanks, Sonyasal & Terryw.
What's a relief!
No, my name was never on the title. The house was meant to be solely for my Mother, but she said I could have it back any time
And my brother's contribution is stated as 'board/lodge' only.
Para 17 of the above link that you sent me, Terryw, has put to rest my intention to seek a Private Ruling.
Thanks heaps!
Jenny
And my brother's contribution is stated as 'board/lodge' only. You must be logged in to reply to this topic. If you don't have an account, you can register here.
