Forums / Property Investing / Help Needed! / Purchasing property for child.

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  • Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 134

        The wife and i have decided to make provisions for our new son. We were thinking of just putting away say $40 per week till he is 18,but even with compound interest it wont add up to much especially with inflation. Wondering now if we find a decent property that can be neg up to around the same 40-50 dollars a week the return will be a lot better.

        The question is what happens when he comes of age,can we just gift it to him? Or sell the house and wear the cgt and gift him the proceeds? Family trust maybe? Any help would be much appreciated,thanks.

    Profile photo of fsatarfsatar
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    @fsatar
    Join Date: 2014
    Post Count: 17

    As far as I know all gifts are tax free if you fill out a statuary declaration which can be purchased at any news agency. I have not been operating in Australia for 4 years as I now purely operate in the Thailand property market so the law may have changed. Its best to speak to a certified accountant.

    Profile photo of Jacqui MiddletonJacqui Middleton
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    @jacm
    Join Date: 2009
    Post Count: 2,539

    Hi Solomon

    With regards to property being the vehicle, if you bought it in your own names, then transferring/gifting it to your son would result in Capital Gains Tax for you, and Stamp Duty for him.  In this regard, a family trust may well be the way to go.  With a bit of luck Terry will pop in to say hi and contribute his thoughts on the matter.

    Property is of course not the only vehicle for investment, but this being a property forum, most of the response will be around the property topic.

    Jacqui Middleton | Middleton Buyers Advocates
    http://www.middletonbuyersadvocates.com.au
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    VIC Buyers' Agents for investors, home buyers & SMSFs.

    Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 134

      Thanks for the replies. JacM, as you said property isn’t the only investment,but over the length of time we are planning on,it looks to be a good one. On the trust issue would it be worth setting one up just for one or two properties?

    Profile photo of TerrywTerryw
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    @terryw
    Join Date: 2001
    Post Count: 16,110

    Dangerous to comment when you don’t know the answer!

     

    Gifting will result in being taxed in 2 ways.

    1. CGT will be assessed on market value

    2. Stamp duty will be assessed on market value

     

    I don’t know when this wasn’t ever the case.

     

    There are ways to structure things so that no stamp duty or CGT will be incurred and that is to purchase in as bare trustee for the child. When the child is 18 or over he can then direct the trustee to transfer it to him. Needs to be set up carefully  for this to work and you may have issues with financing it.

    Terryw | Structuring Lawyers / Loan Structuring Pty Ltd
    http://propertytaxbook.com.au/
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    Lawyer, Mortgage Broker and Tax Advisor (Aust wide) http://propertytaxbook.com.au/

    Profile photo of TheNewGuyTheNewGuy
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    @thenewguy
    Join Date: 2014
    Post Count: 151

    Sort of hijacking a thread here. But I had the same idea, in the end I just purchased it in my name for the following, but potentially wrong reasons!

    – Taxation is easier. Depreciation, potential short term losses – vacancy, changing interest rates etc
    – Purchasing is easier
    – Selling, if everything fails seemed easier

    This way I just rent it out, and when my child (I have 2, and each have one IP) turns 18 then they can either move in rent free or manage it themselves and take the rent – which I will still have some oversight since it’s in my name. When I die, I will gift it then where there is no CGT or Stamp Duty requirements (right?).

    If they want me to sell the house earlier, I can, then take the cash and gift it to them.

    Profile photo of Solomon10Solomon10
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    @solomon10
    Join Date: 2010
    Post Count: 134

    Thanks Terry,finance issues with the trust might turn me more towards the way the new guy did it,keep it in my name and work it all out in 18-20 years.

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