Want to help out the parent!!!!!

I have never paid attention this. Most likely you have covered this somewhere.
Do children need to pay CGT on when they inherit their parents home?

 

Yes. But the old house went up by a larger percentage (now has been duplex approved). If they only kept both...

 

Hindsight is 20/20.
You'd go crazy if you dwelled on what ifs for every good deal you should have bought

 

No CGT on the transfer from the estate to the beneficiary. But when the place is sold CGT may be tirggered. But this will all depend on a few factors such as if it was the parents main residence or rental and if the children had rented it out.

For one aspect see
Tax Tip 94: Inheriting Pre-CGT Property https://propertychat.com.au/community/threads/tax-tip-94-inheriting-pre-cgt-property.7168/

 

It can be a good idea to help parents keep preCGT property. Gifting or lending them money to do so can help, but you have to factor this in with their estate planning - they may not leave the property to you in their wills, or their wills may be challenged or you may die before them etc

Transferring your wealth to your parents is a good asset protection strategy too - subject to the above.

 

The great deals I missed in the past have all been due to finance. I didn't have a good finance broker at that time. Broker says "no problem". I go cool. I go ahead and get it under contract (with cooling off period). Then the broker goes all quiet and uncommunicative...

Could have bought a house on good land near Doonside station for 320k a couple of years ago. Or a Lavender Bay apartment or Lane Cove for low 4's.
Oh well. Can't dwell on the past though.

 

Ok... there are multiple combinations possible.
Lets see if I can cover most logically.
Our children can inherit our
A. PPOR or
B. IP.
They can choose to
1. Rent or
2. Live
Finally,
a. sell within 2 years
b. sell after 2 years

Now we have
A1a: PPOR - Rent - Sell 2- years
A1b: PPOR - Rent - Sell 2+ years
A2a: PPOR - Live - Sell 2- years
A2b: PPOR - Live - Sell 2+ years
B1a: IP - Rent - Sell 2- years
B1b: IP - Rent - Sell 2+ years
B2a: IP - Live - Sell 2- years
B2b: IP - Live - Sell 2+ years

So which ones will attract CGT? What would be the start date? Is it the date of dead or bought date??

 

You forgot preCGT/Post CGT.

Basically if the main residence of the deceased is inherited it is free of CGT. If it is rented by the beneficiary it will be subject to CGT with the cost base the value as of the date of death.

If an investment property of the deceased is inherited it will be pregnant with CGT. When it is sold the cost base will be the cost base of the deceased.

 

You can help out your kids by moving into an IP just before you die.

 

You do have a funny bone

 

I was being serious!

 

Maybe they needed the money from the old house to afford the new one....
Marg

 

Good point Marge. You got me thinking. What happened was they paid off the old house so there was no debt on it any longer. Then again they only paid $32,050 for it back in the early 70's so even if they had that debt on it, there was not really any sizable debt even if they paid interest only the entire time. Any rental income would virtually have to be taxed as income.

Unfortunately you can't pull money out to buy a PPOR and still be able to claim interest expenses. My thought is that they were too focused on getting the debt on the PPOR down (thought of the debt was overwhemingly "we have to pay it off") that they didn't try to buy an IP at the same time (or even as Sydney's prices doubled shortly after - they immediately had a heap of equity just sitting there....)

But the real kicker... For their 300k budget they could have bought a Cliff Rd house at Epping. A short walk to station. A couple of years ago they could have sold that for over 3mil as it got rezoned for unit blocks.

Not sure why they decided to not go with that home... maybe it was thought to be fractionally too expensive (like they could buy an alternative home elsewhere for 20k less)...

 

Back to the topic.

Matt, asking your parents to pay you rent is just not on.

You can draw equity from your house (as you are employed and they aren't) to pay for the required maintenance to their property and have it repaid from their estate. Mixing of ownership is a no-go zone as far as family fights go.

There are plenty of ways your parents can access the funds for required maintenance. You accessing an IP is usually best kept separate from the family.

 

One strategy is for you to buy the property your parents want to live in. You become the owner and rent it to them at market rent (less say 10% that you would pay to an agent) and you claim all costs. you can separately gift them a sum of money if you want.

This way they can keep the other property rented out and CGT free.

But they may have their pensions effected. When considering social security you also have to factor in any tax free capital growth compared to the pension.

 

Just my opinion.

On a moral level, I cannot justify your proposed plan at all. That's just me.

Because there is always a chance you or your sibling will kick them out. Can't ignore this when situation can change from current

However I do understand your situation.

Any chance perhaps your parents can live rent free when they fork out their 50% share. The rest you can cough it up with your sibling. ?

Their names would be on the title

 

I find it interesting how so many people comment along lines of just help them out etc.

Everyone can only do so much. I agree you should try to help out your parents if you can afford to. However I'm going to offer a personal example. I'll be pretty ****** off if I have to put my family's financial independence on hold to help my parents out. Why. Because my dad has earnt ridiculous amounts of salary over the years and squandered a lot of it selfishly and living outside of his means. If he had lived more appropriately he could have retired years ago on a 6 figure income.

I'm not saying I wouldn't, but I anticipate I'd be a little resentful of the squandered opportunity.

 

It's disappointing at the time, but it's a learning experience.
And I'm sure you put your money into some pretty good deals after that.

 

Do they need to be conscious when you carry them over there ?

 

As long as they have a pulse you should be fine.