Q - We are in our late 70s and in 2007 my wife and I bought a house for our daughter (registered in our names and that of our daughter in three equal shares). Our daughter has lived in it rent-free. We now propose to transfer it to her as a gift, but we have to pay capital gains tax. Recently you wrote that as we have not received any income from the property we could add all council rates to reduce the CGT. What other expenses could we add to further reduce CGT? The hot water and air conditioner have been replaced and reticulated gas has been connected.
A - As the property was acquired after August 20, 1991, and it has never produced income, you are entitled to add all expenditure to the base cost when calculating capital gains tax. This includes rates, land tax, insurance, electricity and even things like replacing light bulbs. This is why it is vital to keep good records. Your situation also serves as a warning about the dangers of helping children buy a home by becoming a co-owner. There are other ways you can help without putting your name on the title, in which case there would be no CGT to pay as the property would never need to be transferred to the child.
Q - My wife and I are self-funded retirees who until now have not claimed any pension entitlements except for the Low Income Health Card. I am 66, my wife is 60. The balance in my superannuation income account has dropped to around $730,000. My wife also has an accumulation account with a balance of around $5000. We currently draw a monthly pension of $4167 from my income account as well as random lump sums to cover holidays, vehicles, home improvements, etc. It's been suggested I transfer $300,000 from my income account to my wife's accumulation account to reduce my assessable assets and apply for a part age pension. Are there any hidden implications?
A - As you are 66, you could certainly withdraw $300,000 tax-free and your wife could contribute that to her superannuation using the three-year bring forward rule. It would not be counted by Centrelink until she reaches pensionable age. A bonus of this would be that you're converting a large part of the taxable component of your own superannuation to non-taxable component in your wife's name.
