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VIC Inheritance from Parent - Capital Gains Tax?

Discussion in 'Property Law Forum' started by Alex_rm, 3 June 2015.

  1. Alex_rm

    Alex_rm Member

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    Hi everyone.

    My mother wants to transfer the holiday house's title to be under my name as an inheritance. It is located in Victoria and has a capital approved value of $896,000. The house is not her principal place of residence, but it is never rented out. It was purchased 40 years ago and renovated 15 years ago. I am 25 years old and plan to live there as my principal place of residence.

    Is there any way to avoid Capital Gains Tax or other associated fees when transferring the title to myself under property law?

    Thank you.
     
  2. Mary W

    Mary W Well-Known Member

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    The short answer is no.
    You generally do not get an "inheritance" until the person who wants to leave you the property dies. Calling it an inheritance does not make it so. If your mother was to transfer it to you before she dies she ( not you) would be liable for capital gains tax and you would have to pay stamp duty on the transfer. It doesn't matter that it was not rented out.
    If the property passes to you to on your mother's death, you would not have to pay any CGT until you sell the property. CGT doesn't just go away.
    Also, not sure how relevant this is, but your mother would need to be careful of disposing of property this way because there could be implications if she was to apply for Centrelink benefits and was seen to be disposing of an asset for that purpose. I think there is a 5 year period for the aged pension but that is something to be aware of. You would both be well advised to get legal and financial advice before doing anything like this. You can be sure the tax office has heard it all before.
     
  3. Sophea

    Sophea Well-Known Member

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    Yes, whilst CGT will not be payable on the transfer to you as beneficiary under a will, you will need to pay CGT when you sell it. What happens is the first element of your cost base is taken to be your mother's cost base on the date of her death. You are also entitled to include in your cost base whatever you spend on conveyancing.
     
  4. Mary W

    Mary W Well-Known Member

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    Hi Alex
    I have just realised that you said the house was purchased 40 years ago, that is, before the capital gains tax regime commenced. It is not clear when your mother acquired the house- if it was before 20 September 1985 then as I understand it there would be no CGT, although not sure whether the renovations would make a difference to that.
    If she acquired it after that date then yes transferring or selling the house to you would usually trigger a CGT event, as the tax office calls it. Again I strongly suggest getting formal legal and financial advice about this as it can be tricky.
     

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