Join Australia's most dynamic and respected property investment community

Best way to buy the in-laws place

Discussion in 'Accounting & Tax' started by montoya, 19th May, 2016.

Tags:
  1. montoya

    montoya Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    58
    Location:
    Sydney
    My partner and I are in a position to take over the in laws place (their PPOR) and mortgage. This is their situation.

    Market value: $580k
    Loan: $380k

    If they sold it on the market they would use the $200k to build a house on my brother in law's land.

    We would like to take ownership of their place because we think it has good CG prospects. Now we just need to know how to do it in a way that:

    A. Is a tax advantage for us (or at least not a disadvantage)

    B. Won't affect their ability to qualify for a pension.

    This is beyond my knowledge, but I'm sure that between all the minds here, we'll quickly find out whether this is a good idea or not.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    5,556
    Location:
    Sydney or NSW or Australia
    Stamp duty is at market value, how you work the rest is up to you.

    If you buy below market, you may be up for more in capital gains if you ever sell.
     
  3. Mumbai

    Mumbai Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    763
    Location:
    Sydney
    not if it is their PPOR.

    Don't see it any different to you buying a property from open market. Just go the normal buy process from them

    Again, its no different to them selling in an open market.

    Disclaimer: Just my thoughts.
     
  4. Paul@PFI

    Paul@PFI Tax Accounting + SMSF Business Member

    Joined:
    18th Jun, 2015
    Posts:
    2,368
    Location:
    Sydney
    You cant "take over" a mortgage
    Market value must be used - Any variation from that will affect Centrelink (gifting)
    They lose tax exemption on the proceeds
    The cash will be subject to income and asset tests and likely affect pension
    You must charge them market rent if they retain tenancy. Otherwise deductions may be proportionately affected.
    Rental must be on arms length terms and payments evident
     
  5. Marg4000

    Marg4000 Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    913
    Location:
    Qld
    Simply buy it at agreed value in a private transaction. Preferably at market value as there is another sibling mentioned.

    However, there will be pension implications if they sell it to you below fair market value The discount will be a deprived asset, and will affect their pension for five years.

    Make sure they get advice if planning to sell to you cheaply.
    Marg
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,973
    Location:
    Sydney
    A. No
    B. Depends on their situation
     
  7. montoya

    montoya Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    58
    Location:
    Sydney
    Sorry, should have mentioned that it would be an IP for us, with them renting it from us until their new build is complete, then we would rent it out through a RE. Does that change anything?
     
  8. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,973
    Location:
    Sydney
    You should really buy it at full market value from them as there are many legal issues if you don't. Maybe a finance finance type arrangement could be considered?
     
  9. JohnPropChat

    JohnPropChat Well-Known Member

    Joined:
    10th Sep, 2015
    Posts:
    567
    Location:
    Perth
    Why be obligated to buy family-property at market value when you can bargain on a stranger's property for a better price?
     
    teg499, Player and Terry_w like this.
  10. wylie

    wylie Moderator Staff Member

    Joined:
    18th Jun, 2015
    Posts:
    2,926
    Location:
    Brisbane
    Because there will likely be siblings thinking "they'e screwed over mum and dad" or "why are they getting a discount? What's in it for the other kids?"

    When we've done deals between family members, we've paid for valuations. That way it is fair and nothing likely will come back to bite you down the track.

    That is just my thoughts on pricing, but there are other issues to be looked at as others have pointed out.
     
  11. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

    Joined:
    18th Jun, 2015
    Posts:
    8,973
    Location:
    Sydney
    For these reasons it may be best to avoid.

    Even if purchased at market value relos may think it was below value and there was some exploitation involved.
     
    teg499 and JohnPropChat like this.
  12. Azazel

    Azazel Well-Known Member

    Joined:
    18th Jun, 2015
    Posts:
    8,113
    Location:
    Brisbane
    Just wait until you inherit it if you can.