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Jansen Walsh and Grace

Transfer of properties and loans to your children

Since 1 May 2018, we have noticed that the banks are now applying stricter lending criteria.  It is getting harder for your son or daughter to buy a house.  This is a consequence of the hearings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.  For some time now, it has been quite common for parents like you to transfer a property, or to provide a loan, to their son or daughter.

Quite a number of parents provide loans to their children to enable them to buy a property, or transfer a property they own to their son or daughter.  This is called the Bank of Mum and Dad.  Collectively, the Bank of Mum and Dad is one of the largest financial institutions in Australia.  There are obvious dangers in being the Bank of Mum and Dad.  You want to be sure that you are making the right decision.  If you have other children, a gift of money or property to one child may cause resentment on the part of the other child, even though they tell you: "Whatever you want to do".  You may take this into account by amending your will.  However, this is not without risks.  For example, because your child could get married or form a relationship which later breaks up, we recommend that your loan be documented and supported by a mortgage or a charge, so that it is not subject to orders under the Family Law Act.  This also provides some protection if, at some later date, your son or daughter becomes bankrupt and the property vests in the trustee of ttheir bankrupt estate under section 58 of the Bankruptcy Act and become divisible among your child's creditors.

Land transfer duty

If you are transferring one of your properties to your son or daughter, the transfer is subject to land transfer duty on the actual market value of the property at the date of the transfer, which they will have to pay.  You can calculate the land transfer duty and the transfer registration fee, if you wish.

Capital gains tax

If you transfer one of your properties to your son or daughter, the transfer will also trigger a CGT event, which means you must pay actual capital gains tax on the market value of the property less the cost base.

Tracking the progress of the transfer to your son or daughter
We can reduce the stress by instantly updating you on the progress of your transfer.