Keeping real estate in the family has tax traps for sellers


6 May, 2010

Keeping real estate in the family has tax traps for sellers


Transferring a home to a family member is a great way to help younger Australians into a first home, but it can create a tax liability for the seller, warns Raine & Horne CEO Angus Raine.

Due to Australia’s ageing population and rising house prices, more homes are being sold between family members to help smooth the path for younger Australians into a first home.

However Mr Raine said many sellers needed to understand the tax implications attached to this transaction.

Capital Gains Tax (CGT) is quite complex and buyers and sellers must be aware of this when they enter into intra-family property transactions,” Mr Raine warned.

“While it might make sense for families to pass on a home or investment property to other family members, it’s important to check whether a capital gains tax liability might apply.”

A family with an investment property worth $300,000 can sell it to another family member for less than market value, for example $150,000. But in cases such as this capital gains tax (CGT) is calculated on the value of the property, not the sale price, and families might not anticipate paying extra tax.

Peter Bembrick, Partner, Taxation Services, HLB Mann Judd Sydney explained that a homeowner selling a primary residence to another family member was not required to pay CGT on the property sale.

“Generally CGT only becomes a problem if families sell an investment property to another family member for less than the market value,” Mr Bembrick said.

"Be aware that stamp duty is also charged on the value of the property, so in the example above, NSW stamp duty of $8,990 would apply on the full value of $300,000."

Mr Bemrick warned that people thinking about transferring a home to a family member should seek professional financial advice taxation liability beforehand.

Raine & Horne is an iconic Australian property firm, with more than 400 offices worldwide. Also an established Superbrand along with the likes of Qantas, Vegemite, Woolworths and Myer, the company has four distinct property service brands including Raine & Horne Residential, Raine & Horne Commercial, Raine & Horne Financial Services and Raine & Horne Rural.

For more media information contact:

  • Angus Raine, CEO Raine & Horne on (02) 9258 5422 or 0409-920-697
  • Peter Bembrick, Partner, Taxation Services, HLB Mann Judd Sydney on 02 9020 4223
  • Alana Drivas, Marketing Coordinator, Raine & Horne on (02) 9258 5448