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16 January 2020 11:10 AM - edited 16 January 2020 11:13 AM
Views 2936
Replies 2
Dear ATO Community.
My wife and I have purchased a new property. As we are planning to have a parent move in with us, we are doing some renovations to upgrade the kitchen and build an extension for the parent to live. The parent has provided us with a gift - withdrawn from existing super funds - under "Granny Flat Interest" (GFI) for lifetime accommodation and care.
After doing some research on tax and pension implications, I have assumed the following:
However, it seems that the GFI agreement might result in Capital Gains Tax (CGT) for the children.
I am seeking out the opinion of the community that explains why this would attract CGT (as there has been no disposal of assets) and if any recent changes have been made to this as there is a conflict in the requirement for a GFI agreement related to pension, but the same agreement would invoke CGT. Finally, what should we do to avoid the CGT implications and protect the pension of the parent.
Your opinion is greatly appreciated. Thank you.
Most helpful response
16 January 2020 03:10 PM - edited 16 January 2020 03:13 PM
Replies 1
(1) Withdrawl from super when over 60years old is NOT always tax-free
With a "Lump Sum Payment" - The Taxable Component - Untaxed Element is taxed at 17% up to the Untaxed Plan Cap Amount
(2019-2020 = $1.5.15 million) and at 47% above that.
(2) Gifts are tax exempt.
(3) Difficult to say what the "Gift' will be viewed by Centrelink without first asking. I think if it is a reasonable amount for the "Granny Flat" then it may be ok.
(4) Yes, it will attract CGT as a person who grants a right of occupancy for life or a life interest is a CGT event for the person granting the interest.
The ATO has stated that the market value of a lifetime right to reside in a dwelling depends on a number of factors including the life expectancy of the person who is the subject of the right and the nature of the dwelling.
Taxpayers must determine the market value and seek advice, if in doubt.
This has a lot more other information that will be useful.
Most helpful response
16 January 2020 03:10 PM - edited 16 January 2020 03:13 PM
Replies 1
(1) Withdrawl from super when over 60years old is NOT always tax-free
With a "Lump Sum Payment" - The Taxable Component - Untaxed Element is taxed at 17% up to the Untaxed Plan Cap Amount
(2019-2020 = $1.5.15 million) and at 47% above that.
(2) Gifts are tax exempt.
(3) Difficult to say what the "Gift' will be viewed by Centrelink without first asking. I think if it is a reasonable amount for the "Granny Flat" then it may be ok.
(4) Yes, it will attract CGT as a person who grants a right of occupancy for life or a life interest is a CGT event for the person granting the interest.
The ATO has stated that the market value of a lifetime right to reside in a dwelling depends on a number of factors including the life expectancy of the person who is the subject of the right and the nature of the dwelling.
Taxpayers must determine the market value and seek advice, if in doubt.
This has a lot more other information that will be useful.
Thanks macfanboy. That was exactly the information I was after.
Time to see the accountant I guess...
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