Legal Insights: A Lawyer’s Guide to Transferring Property to Children

Real estate is expensive, and some parents desire to add their children’s names to the title certificate or transfer the property to them.

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A Lawyer’s Guide to Transferring Property to Children

This article will introduce you to the procedures governing the addition and transfer of property titles in Australia, allowing your children to share the benefits of the property at a low cost.

How Can I Transfer Property to My Child Legally?

In Australia, there are numerous ways to transfer property to your children. This article introduces three methods: gift, sale, and inheritance.

• Gift Contract

Parents can directly. Gifting property to their children does not require a contract, but for insurance purposes, it is recommended to sign a Deed of Gift agreement that clearly expresses the nature of the gift.

The gift has the advantage of eliminating the need to pay for the house’s purchase, making the process simpler and the transfer of ownership faster.

Although the sale price of the property is zero, this does not imply that there is no tax.

The government will first examine the market value of the donated property using professional assessment reports or reputable information, and then decide the amount of stamp duty.

Second, if the property is sold after two years from the date of inheritance, it must pay Capital Gains Tax (GST), however, if it is sold within two years, it may be free from CGT.

• Sale 

The contract for the transfer of property between parents and children is the same as any other property sale transaction, with stamp duty and capital gains tax computed at standard rates.

Because it is a parent-child deal, the price is usually lower. Some parent-child couples may construct a yin-yang contract to lower their tax payments through cheap transfers.

However, instead of charging only the contract price, the government will use professional appraisals or reliable reference sources to determine the market price of the property, and if the property is trading at an unreasonably low price, the government will charge the market price, preventing people from exploiting the loopholes.

• inheritance 

Children can become property owners through legal inheritance or testamentary succession. The advantage is that there is no inheritance tax or stamp duty to pay, and inheritance is the most tax-efficient way to transfer property.

However, it has several drawbacks. First, inheritance can only be conducted after the death of one’s parents, which takes a lengthy period and may be affected by changes.

Second, while executing the will, it must be certified by the court, and during this time, there is a potential that it will be illegal or its legality is in doubt owing to noncompliance with inheritance law, preventing the smooth inheritance of property by the children.

It should be noted that when the children divorce, the court will normally list the spouse’s assets in the asset pool for property distribution; however, property in the name of the children will also be counted, and the mate may receive a free piece of the pie.

There are two ways to prevent this from occurring.

First, the property selling expenses can be lent to the children as a loan, so that even if the children divorce in the future, the loan is a shared liability, and if the other half acquires a piece of the property, you must repay the corresponding loan.

The second way is to engage in a binding accounting agreement (BFA), which states that children and partners cannot make any claims against the property.

Is there a charge to add children’s names to the real estate certificate?

Yes. The addition of children’s names to the real estate ownership certificate fundamentally alters the share of real estate holdings, with the parents reducing their stake and transferring it to their children. To carry out this procedure, a property transfer contract is necessary, and the relevant tax is paid based on the contract price. Taxes and fees primarily include the following aspects:

• Registration Fee

If the child’s name is added to the real estate ownership certificate, the property rights registration must be completed anew, and the appropriate property rights registration fee will be charged.

• Stamp Duty Fee

In most cases, transfers between parents and children are subject to stamp duty, which is calculated based on market value. Some states provide stamp duty exemptions or deductions for household transfers under specific conditions.

• Property Tax Specialist

 If the property was not always the primary residence and was purchased after September 20, 1985, capital gains tax may be imposed on transfer.
There is no gift or inheritance tax on property transfers in Australia, which is a significant benefit over other nations and areas and can save you a lot of money.

3. Can minors in Australia buy a house?

Minors in Australia (usually under the age of 18) are legally permitted to purchase a house, subject to specific rules and requirements. Details include:

• Trust structure: Typically purchased in the form of a trust, with the trust holding the property and the beneficiaries being minors.
• Court approval: In certain instances, court approval is required.
• Guardian involvement is required during the purchasing, as is legal documentation.

Conclusion:

I hope the information above is useful in transferring or altering the names on your property between you and your children.

I wish you and your children a happy completion of the shift of property rights, and that you enjoy your life in Australia!

If you have further questions or need assistance, please don’t hesitate to contact our specialist property lawyers!