Receiving a property as a gift can have significant immediate financial benefits, yet it involves various legal and tax considerations if you plan to sell.
Whether you inherited the property or received it as a gift during the giver’s lifetime, understanding the tax implications and legal requirements is essential.
Deed of Gift
The first step in acquiring a gifted property involves the legal transfer of the property’s title from the giver to the receiver. This is typically done through a Deed of Gift, a legal document that formally records the property transfer without financial exchange. Proper drafting and registration of this document are critical to facilitate a future sale.
Capital Gains Tax (CGT) Implications
Selling a gifted property necessitates consideration of Capital Gains Tax (CGT). CGT is calculated on the difference between the property’s cost base (it’s value when gifted) and the sale price. Properties that were the giver’s primary residence may qualify for a CGT exemption under certain conditions.
Exemptions
Properties that were the main residence of the deceased or were acquired before September 20, 1985, might be partially or fully exempt from CGT. This means you could avoid paying tax on some or all of the profit made when you sell.
If you inherit a property that was the deceased person’s primary residence, the CGT exemption often applies to the entire property. However, if you used the property for income-generating purposes, such as renting it out, you may owe CGT on the income portion of the sale proceeds.
Timing Matters
The property’s market value at the time of the gift establishes the cost base for CGT calculations. A significant increase in value since the gift could lead to a substantial CGT liability. Conversely, a decline in market value could result in a capital loss, potentially offsetting other capital gains.
Record-Keeping
Maintaining accurate records of the transfer, property valuation at the time of the gift, and any associated costs is essential, particularly for audit purposes.
Also read: Can My Parents Sell Me Their House Below Market Value
Financial Aspects
Understanding the Market
It is important to conduct thorough market research before listing a gifted property for sale. This includes researching current market trends, property values in the area, and the best timing for listing the property to maximise returns.
Setting the Right Price
Pricing a gifted property can be challenging, especially considering the emotional value attached to it. However, setting a realistic price that reflects the market and the property’s condition is crucial for a successful sale.
Selling a gifted property in Australia requires careful legal, financial, and strategic planning. By being well-prepared and seeking professional guidance from an expert selling conveyancer, you can manage the sale process effectively and achieve a favorable outcome.
Selling a Gifted Property in Australia?
Considering selling a property you received as a gift? At CJC Law, we specialise in comprehensive legal guidance for selling gifted properties.
Our team ensures you are fully informed about tax implications, legal requirements, and your rights.
Contact CJC Law today for expert advice tailored to your unique situation and take the first step towards a successful property sale.
