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Buying property from parents at below market value

Discussion in 'Accounting, Tax & Legal' started by Sprinkler, 18th Mar, 2010.

  1. Sprinkler

    Sprinkler New Member

    Joined:
    18th Mar, 2010
    Posts:
    2
    Location:
    Melbourne, Victoria
    Hi,
    I hope someone can help us.
    We live in a house which is owned by my father. We would like to buy the house from him, but cannot afford to pay the full market value. Are there any penalties for him if he sells the house to us for less than market value? I am a single child, so I would inherit the house eventually.

    Any help or advise on where to find the answers would be great.

    Sprinkler
     
  2. Rob G.

    Rob G. Well-Known Member

    Joined:
    6th Jun, 2007
    Posts:
    717
    Location:
    Melbourne, VIC
    If the house has not been fully your father's main residence throughout his ownership, the CGT may be an issue for hime.

    He will be deemed to have received market value for CGT calculations.

    Incidentally, if you have been occupying the house and paying running costs with an eventual intention to purchase it off your father one day, then the CGT date *might* be backdated to when you first used the property (CGT event B1).

    This could dramatically reduce your father's CGT bill if it was previously his main residence and also allows you to use the main residence exemption from when you occupied it for yourselves.

    Just a thought. Whether it applies or not remains to be seen after you talk to your Accountant.

    Cheers,

    Rob
     
  3. Sprinkler

    Sprinkler New Member

    Joined:
    18th Mar, 2010
    Posts:
    2
    Location:
    Melbourne, Victoria
    Thanks very much.
     
  4. GregR

    GregR Reid Consultants

    Joined:
    13th Jul, 2009
    Posts:
    273
    Location:
    Berwick Vic
    Sprinkler,
    The other factor to consider may be on his pension if he is no longer working and is not a self funded retiree.
    You could look at a lease buy option that may help cash flow or a deferred payment option or a form of vendor finance.
    Greg