Media stories abound about the spiralling value of real estate, particularly in Sydney, and the pressures young people face in getting a foot hold into the market.

Many of our clients are in a position to help their children into the property market but care and careful planning are needed if unintended financial consequences are to be avoided. 

Let’s assume that you own an investment apartment which is unencumbered and you want to gift it to your son or daughter to provide them with a first home.  The apartment is worth $850,000 and you transfer it for zero consideration.

What can go wrong?

Leaving aside the risk that the property could be at risk if your son or daughter has a rocky relationship with their partner or faces financial difficulties, there are a number of factors that should be considered before you make the gift:

  • If the cost base of the apartment in your hands is $500,000 you may be deemed to have made a capital gain of $350,000 even though you didn’t receive any money for the transfer.
  • Your son or daughter will have to pay full transfer duty (what used to be called stamp duty) on the transaction based on a market value of $850,000.  This is presently $33,585.  If the apartment had been transferred under your will then transfer duty on transfer of the asset to the beneficiary named in the will does not arise.  Further, in most cases, the transfer of a CGT liable asset to a named beneficiary who is entitled to that asset will not impose a CGT liability on the beneficiary when they acquire the apartment but they are likely to be liable to capital gains tax, calculated in the normal way, if they dispose of it.

You can see in this example that, if it is possible to plan your estate to provide the benefit to your son or daughter instead of transferring the property now, substantial sums might be saved in transfer duty and in capital gains tax liabilities affecting you. 

We all want to help our families to thrive but take care to receive proper advice before taking any steps as you may end up with an unintended and substantial financial burden as a result. 

For further information please contact us on 9525 8688 or at for assistance in any estate planning or property related issues.