Ask Paul: Can we transfer a house to our daughter?

Dear Paul,

In 2019, we purchased a home for our daughter, who is a single mum with one child.

She pays all bills and the mortgage.  My husband is 70 years young and I am 63. We are aware we cannot receive a pension or healthcare card as we are deemed to have too many assets.

I'm now in a quandary as to which way we go in regard to "selling" the property to her. I want her to take over the mortgage and title of ownership. What would be the tax implications for us? Or do we just keep it as it is? 

We have updated our wills to state our home is sold and pays out all money owed, and her brother is given the equivalent. It is mainly our retirement funding I'm now concerned about.

Hopefully you can give me some advice as to which is the best way to go for all of us. - Chris

That was a very generous and practical step you both took to assist your daughter, Chris.

Being single with a child is, as you well know, not easy, let alone paying for housing and childcare while working. With rent exploding all around Australia and rental properties in short supply, the step you took to buy a home for her also gives her a great deal of security.

The action you have taken here is something I strongly support. You are not old, and hopefully have many decades in front of you. Not a lot of point leaving assets to our kids when they are in their 60s - the reality is they can best use sensible help now.

I understand why you would have originally bought it in your name - that way it is secure from any relationship claims. It keeps the asset safely in the family. I assume that things are now stable for your daughter and hence you wish to transfer it, though I am far from sure this is your best option.

Selling it will not reduce your assets for potential future pension purposes in any real way as it will be assumed to be "deprivation" of assets.

My understanding is that it will remain your asset for pension purposes for five years.

My suspicion is you may not qualify, anyway. If so, the tax issues are simpler. You would pay capital gains tax on any increase in value and, of course, your daughter would be up for stamp duty, which can be significant.

Here we need to pause. You mention concerns about your retirement funding. With your own home and a non-pension-exempt investment property you are supplying to your daughter, this is going to be quite complex.

So, before you can make any decisions, it is critical you sit down with a professional adviser and go over your complete situation. An adviser will be able to give you an optimal strategy, but this will be highly dependent on understanding your entire situation.

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