Ask an Adviser - Is Gifting Property Treated The Same Way As Gifting Cash? (2)

Top answer provided by:

Lyle Filer

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Hi Henri,

To start with there is no gifting tax for property in Australia, however you do need to consider a few things that will cost you.

Even though there is no money changing hands in this scenario, there will still be a liability for the paperwork processing fees and the stamp duty costs.  You have also mentioned the property being a unit, and I have assumed here that this is not your principal place of residence, so you may also be liable for Capital Gains Tax (“CGT”).  All of these things are calculated at the market value of the property 

Now, despite what you may have heard, CGT doesn’t need to be feared.  It is calculated as the increase in the value of the property. For example, if you paid $200,000 for the property and it is now valued at $300,000 the CGT is calculated on $100,000. If you have held the property for longer than 12 months, then you get a 50% discount so in that case, our example CGT would be calculated on $50,000.  This amount is then taxed at your marginal tax rate, so if you earned $50,000 this financial year then your earnings (or income) would be increased to $100,000 and you would be taxed on this amount.   

Another consideration for you Henri, is how far away you are from retirement and the Aged Care Pension.  The reason for this is if these things are on the horizon for within the next 5 years, then a gifting of assets will physically deprive yourself of the asset (it’s value and/or income), while still having it be considered as a current asset by Centrelink. This is because the value of the property is over $10,000 which is the maximum amount you can give away, or gift, each year. This could mean that you would potentially not get as much of a government pension as you anticipated.

Remember the 3 things that need to be considered when discussing the cost of your gift are Centrelink plus CGT plus stamp duty.  Just make sure that these are all well within your budget and you can afford all of the potential costs when giving such an amazing gift.

If this makes you feel any concern, please make sure you go and see an independent financial planner that can go through it all in detail with you and specific to your needs and work out exactly how much the gift will cost you. You will then be able to make an informed decision about the gift when you know the full impact it may have.

While the Adviser Ratings Website facilitates the question and answer functionality, all such communications are between users and authorised financial advisers, of which Adviser Ratings has no affiliation. Adviser Ratings is not the advice provider and does not provide financial product advice and only provides information that is general in nature.

Article by:

Lyle Filer

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