VIC Adding Name to Marital Home and Mortgage?

[BradA]

Hi,

Before I pay money to a lawyer, I would really appreciate some help.

Overview:

My wife and I have been married for 10 years and have lived at our family home for 11. My wife purchased our home along with her father and mother (their names are on the title and mortgage).

My name is not on the title or the mortgage. I would like to add my name to the title and mortgage.

After talking to my father-in-law, he has advised me that it is too messy (at least financially) as I would have to pay capital gains tax, etc. I do not believe this to be true, but I could be wrong. My understanding is that if my in-laws were to transfer their share of the home to either myself or my wife, then there would be tax implications, however this is not what we are looking to do. Both my wife and I simply want to add my name to relevant documents so I have a share in our family home.

More than anything, I would just like to know if it is worth pursuing before I contact a lawyer. Any thoughts or feedback from someone who has been through a similar scenario would be greatly appreciated.

Thanks

 

[Sophea]

When you gift your property to a family member you are still charged CGT, as it is still cnsidered a ‘CGT event’.

Instead of being calculated on the actual capital gain, the property is calculated at market value if you:

• Receive no money for your property
• Receive less than the market value for your property; or,
• Do not deal at arm’s length with the buyer during the sale event

Two instances in which you can avoid CGT are:

• If you acquired the asset before 20 September 1985: This date is when CGT came into effect, so any property or assets that were acquired before this date may be exempt from CGT.
• If the property being transferred is your main residence: If you have been living at the property and have indicated it as your main place of residence then you may be exempt from CGT when gifting or selling a property to another. This means that while your wife may be exempt from CGT, her parents won't be, because its not their main residence.

Leaving things the way they are however does leave you in a position where you could lose all rights to the property if she dies. If your wife and her parents are joint tenants the property will automatically pass to her parents upon her death. It bypasses her estate so it can't be disposed of in a will. If they are tenants in common she is able to leave you her share of the property so that you will be come a common owner with her parents.

 

[BradA]

Hi Sophea,

Thank you so much for taking the time to leave such a detailed reply - it is greatly appreciated

Am I correct in understanding that if my wife were to pass-away, the entire property would pass the here parents - if they then decide to give it it to me, CGT would then be applicable to the entire property? Even though it has been my primary place of residence for over 11 years and I have been contributing to paying off the mortgage (which is almost complete)? Unlikely scenario, but certainly not ideal if it happened!

Thanks again.

 

[Sophea]

Am I correct in understanding that if my wife were to pass-away, the entire property would pass the here parents -

Yes - if they are registered on the title as Joint Tenants. If they are registered as tenants in common your wife's share would pass to you if she provides that in her will.

if they then decide to give it it to me, CGT would then be applicable to the entire property?

As far as I know yes. But CGT is payable by the person disposing of the property so that would be their liability not yours. They should have foreseen at the time of purchasing the property with your wife that if they were not going to live in it as their main residence they would have to pay CGT on it. The Commissioner of Taxation would assess their CGT on their share of the property.

There was a case where the Commissioner of Taxation assessed a father who had purchased a townhouse his son in which to reside liable for 50% of the net capital gain arising from the sale. They were registered as joint tenants and the son did not pay any rent or contribution to the purchase price however he did pay for rates, levies and bills and some renovations. Buying a property as joint tenants does not mean that the son’s main residence exemption will cover the capital gain of joint owners not living there.

However, since you have made contributions to the mortgage, and therefore the purchase price then you would have an "equitable" interest in the property, despite not having a "legal" or registered interest in the property. If it came to it, you would have grounds to sue your wife's parents in court for either a share of the house or compensation to the value of your interest in the home.