Facts
Dad owns 100% of the family home. Dad is an at-risk person, for example, he is a director of a trading company. Dad wishes to protect the family home from any claims.
Question
What are the relevant considerations in transferring some or all of the family home to Mum?
Tax Tip
Capital Gains Tax No issue as the main residence exemption ought to apply. Stamp Duty This will vary across states. In Qld and NSW, a transfer is only exempt if it results in a 50/50 split between spouses. In Vic, a transfer is fully exempt between spouses. Loan/Mortgage documents It is strongly advised that the loan and mortgage documents are ‘refinanced’ to reflect the new ownership arrangement. This is due to the case of Commissioner of Taxation v Bosanac [2021] FCAFC 158 (Full Federal Court) where, even though Mrs Bosanac held 100% title to the family home, Mr Bosanac (who had the ATO debt) was held to hold an interest in the family home because his name was on the loan documents and he used the home to secure other borrowings and therefore the ATO could attack his interest. Pre-emptive Strategy The recommended strategy, when buying a property, is the 99:1 ownership split where the at-risk person holds a 1% interest. The 1% is generally necessary for the bank to take into account the at-risk person’s income for loan servicing requirements. Plus, and we cast no negative aspersions, the 1% is a safety net for the at-risk person that the home cannot be sold without their consent.
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