Can You Give Real Estate as a Gift?

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Are you thinking of the gift of real estate to someone in your family? Transferring a house or property to relatives can provide many advantages, but there are some serious dangers you should avoid.

Transferring your property to your heirs while you’re alive could avoid your probate procedure. Transfers of property can be part of a strategy to protect assets.

However, giving your the property to someone else could be tax-related and financial. This is what you should be aware of prior to transferring ownership of real estate.

Can You Give Real Estate as a Gift?

In accordance with Australian law, you are able to gift the property to a family member by way of an outright gift. If you give ownership to a third-party, it is not possible to exchange funds. The procedure for gifting requires the filing of the form of a Transfer of Land with your title office. The filing of a gift deed could be required.

In certain instances it is possible to gift property in the form of the result of a sale. For example, if you wish to gift an individual in your family a home but you have to pay for expenses, they can purchase the property at a lower cost.

Who should be on the Title for property that is gifted to family Members?

If you buy a house you are issued the certificate of Title. The document defines your rights and obligations as the owner of the property. If you transfer or sell the property and the government records the transfer on the title to the property. This official document contains all the details of the property that include:

Ownership
Mortgages
Easements
Covenants
Caveats

After the transfer of the title the family member who you are be the owner of the property.

Is Gifted Real Estate Taxable?

Australia does not have a federal gift tax that applies to:

Cash gifts
Charitable gift donations
Immovable property

However, real estate can be considered a tax-deductible gift. Based on the kind or location and value of the property the new owner could be responsible for:

Stamp duty
Tax on land
Surcharge for owner of the absentee
Taxes on residential properties that are not in use

The tax obligations of the new owner depend on the applicable law of the state.

What are the tax implications of a gift Property?

When you decide to transfer the ownership of a property knowing the tax implications is essential.

Capital Gains Tax

From a tax standpoint From a tax perspective, capital gains could influence your financial position. You must make payments of the capital gains tax (CGT) in addition to your tax assessment for income in the event of disposing of property. That is the profits from the sale are included in your tax-deductible income.
If a property is sold the capital gain is the price paid for the property less the price at which it is sold. When the home is given as a gift and the capital gain is fair market value of the property less the purchase price.

If you gift a home, you must ensure that the Australian Taxation Office (ATO) determines taxes on capital gains by calculating the market value on the day of the 房产过户. A qualified valuer is able to determine the value of the property based on reliable and objective information.

In some instances the property owner can get around CGT on capital gains. You can reduce or eliminate CGT when you transfer:

Your main home
Investment property
Small commercial premises
Property you purchased prior to September 20th in 1985.

A rental property may be your residence. The exception rule for temporary absenteeism, the home will remain your residence in the event that:

The house was not vacated for more than six years, and
You resided in the home for a minimum of twelve months prior to you left.

Stamp Duty

Australian states charge stamp duty on any transfer regardless of whether the property is given to a person as a gift. Contrary to popular opinion it is not an one-time payment. According to tax law, buyers must be liable for stamp duty at the time of all transfers.
Stamp duty is part of the state taxation. For instance, in New South Wales and Queensland you can transfer the interest in a the property to your spouse without having to pay stamp duty. There is no requirement to pay duty after the transfer

Your spouse and you jointly are the sole owners of the house as co-tenants
The house is your permanent home.

Before you begin this transfer procedure, it’s advisable to consult a financial advisor to know details about laws of your state.

Other considerations when transferring property to someone else

Pension Payments

The consequences of giving away the house could go beyond tax implications. When transferring property to a child parents should think about the impact that the move will have on pension.

Centrelink evaluates the earnings from a sale using the value of the property, not the selling price.

As an example, let’s say you gift a home with an estimated value of $250,000 to your children. If you decide to sell the house for the sum of $100 Centrelink is likely to assess profits from the sale at $250,000. In this scenario you could be unable to collect your pension benefits.

Home Credit

In the event that your property are transferring has a mortgage on it then your new owner has to assume the loan. Before beginning this transfer lender who holds the mortgage has to accept the new owner.

Costs

In along with taxes, other charges could apply to the transfer of property. It is possible to pay for an independent appraisal which you’ll need for you file your taxes. There is a chance that you’ll have to pay a solicitor to:

Give you legal advice
Create the agreements necessary and transfer documents
Transfer title to property

If you are considering gifting a home to a family member, think about any other expenses carefully. Also, you must ensure you are sure that the owner is able to pay for expenses, like tax on stamps.