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Transferring titles, centrelink and pension problems

Discussion in 'Accounting & Tax' started by Marlos1, 14th Feb, 2016.

  1. Marlos1

    Marlos1 New Member

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    Melbourne
    Need advice please!
    16 years ago my husband's parents bought
    a property for him to live in. Unfortunately when they purchased it they did not put my husband's name on the title. They used half super and half loan for the purchase. My husband and I have lived in it together for 10 years and have 3 children. We were of the belief that the rent we were paying was going toward paying off the loan and the house would eventually be ours. Over the years we have well and truly paid off the amount of super his father initially put in.
    We would now like to move as the house is too small for us but have discovered a myriad of problems due to the house being in his parents' name and a lot of centrelink/pension issues in what we can do.
    The parents currently receive the full pension and have not been paying off the loan as first thought as it is more beneficial
    for them to keep the loan against the house so they can keep the full pension.
    They can't transfer the title or gift the house as that will affect their pension for the next 5 years.
    We can't afford to buy the property at full market value which would not affect their pension.
    There would be a CGT of approx $80,000
    We can't borrow against the house as it is not in our name.
    They can't sell it to us for less than market value as it would affect their pension.
    We are concerned that as they are ageing and if they might need to enter an aged care facility that our house would need to be sold to pay for it which would leave us with nothing.
    These are just a few of the problems we are facing and have seen two accountants that couldn't find a solution.
    Any advice would be greatly appreciated.
     
  2. Scott No Mates

    Scott No Mates Well-Known Member

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    Isn't living in a house owned by super a breach of the Act by allowing a related party to live in it? (Maybe I missed something).

    If it is inside super, it can't be sold to a related party.

    You might consider a vendor finance deal.
     
  3. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    Not paying for some legal advice has cost you and the parents tens of thousands of $$$$.

    Not much you can do after the event as if you are not on title it is not your property unless some sort of trust relationship exists which from what you have said it probably doesnt.

    They may have to take a hit on centrelink
     
    legallyblonde likes this.
  4. kierank

    kierank Well-Known Member

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    I understand a SMSF can sell a residential property to a related party. The transaction must be at arm’s length basis. That is, on a commercial basis and at market value (determined by an independent property valuation).
     
  5. kierank

    kierank Well-Known Member

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    @Marlos1, I believe your in-laws have breached the Act by allowing you to rent their property (as @Scott No Mates stated) and this is a big No-No with SMSFs. This is your in-laws problems , not yours.

    I am not an accountant nor a lawyer but why don't you move out and rent your own place (solves your problem) and your in-laws put non-related tenants in their IP (at least makes it legal from now on).

    On your in-laws death, one assumes the in-laws property is inherited by your husband. He will have to sort out his parents' loan and CGT on the property. At least, then it becomes yours/your husband's.
     
  6. Terry_w

    Terry_w Solicitor, Finance Broker, CTA Business Member

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    I read the ops post that the inlaws used money they got from their superfund, after meeting a condition of release, to buy property.

    If the property was opened by a Smsf it could not be passed via a will either
     
    kierank likes this.
  7. Rob G

    Rob G Well-Known Member

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    See if a taxation lawyer could reasonably argue on the facts that it was originally a terms sales agreement without finance cost - i.e. no interest income to the parents.

    Then it might be argued that the purchase and sale occurred simultaneously and all this time the property has been held on constructive trust pending final payment.

    In other words:

    1) No beneficial ownership nor income for the parents over the years; and
    2) CGT event B1 occurred back when you occupied the property and so CGT would have been minimal if anything back then; and
    3) You would have the main residence exemption for the entire period you occupied the property.

    Its a bit messy and a long shot but it can't hurt to ask.
     
    Terry_w, S.T, legallyblonde and 3 others like this.
  8. Marlos1

    Marlos1 New Member

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    Thank you everybody for your advice. It is believed my father in law cashed out part of his super to use as part of the payment so I don't believe it is tied up in super.
    The rent that we pay does provide some financial support for both his parents.
    If they were to rent out the property does anyone now how much income they can receive before their full pension is reduced??