Buying Parents’ Property: CGT and Stamp Duty Exemption?

Buying Parents' Property: CGT and Stamp Duty Exemption?

Deciding to buy your parents’ property can blend emotional sentiment with practical considerations. It can help provide financial security for your loved ones while keeping a cherished family home within the family.

However, navigating the complexities of property sales, taxes, and liabilities in Australia can be challenging. In this comprehensive guide, we’ll explore the intricacies of buying your parents’ property and how to potentially minimise capital gains tax (CGT) and stamp duty.

The Heartfelt Decision to Buy Your Parents’ Property

Buying your parents’ property is a significant life event. It can be motivated by various reasons, such as wanting to:

  • Preserve Family Ties. Keeping the family home can maintain a sense of continuity and connection with your heritage.
  • Provide Financial Support. Purchasing the property may allow your parents to access equity for their retirement or other financial needs.
  • Avoid Disruption. Moving parents to a new location can be stressful, especially for elderly family members. Buying their property can prevent such disruptions.

However, approach this decision with both your heart and your head. Practical considerations, including tax implications and financial responsibilities, must be thoroughly understood.

Property Sales and Transfers in Australia

Before delving into strategies to minimise CGT and stamp duty, let’s clarify the typical process for purchasing your parents’ property in Australia:

Agreement of Sale… or Not

Normally, property sales are governed by an Agreement of Sale and a formal Contract of Sale. However, for inter-family property sales, the team at OzPropertyLaw stressed there’s no need to file those papers, as long as both sides are related by blood or marriage. As such, both sides can approach a single solicitor and financial advisors with expertise in property transactions. They can guide you through the intricacies of the sale, ensuring you’re well-informed and protected throughout the process.

Transfer of Ownership

The property’s ownership must be formally transferred from your parents to you. This involves filing the necessary paperwork with relevant government authorities, such as a title search and council zoning certificate..

Payment of Stamp Duty

Stamp duty is a tax levied by Australia’s state and territory governments on property transactions. The amount varies depending on the property’s value and location. It’s typically payable by the buyer.

Capital Gains Tax (CGT)

CGT is a federal tax imposed on the profit made from selling an asset, including real estate. When purchasing your parents’ property, CGT can apply if the property has increased in value since they acquired it.

Minimising CGT and Stamp Duty

While CGT and stamp duty are legitimate obligations, there are strategies that can help you reduce the financial impact of these taxes when buying your parents’ property. 

Principal Place of Residence (PPR) Exemption

One of the most significant tax benefits in Australia is the PPR exemption, also known as the main residence exemption. If your parents have lived in the property as their primary residence, and it’s their PPR, it may be exempt from CGT. This exemption can significantly reduce the CGT liability.

Under the main residence rule, you may qualify for the Principal Private Residence (PPR) exemption if you promptly move into the property after acquiring it from your parents and establish it as your primary residence. This could help you avoid CGT on future appreciation in the property’s value.

Family Home CGT Exemption

If your parents are transferring their family home to you, they may be eligible for a CGT exemption under certain circumstances. This exemption could apply if they meet specific criteria such as being over 60 years old and the property has been their main residence for a certain period.

Under ATO rules, CGT exemptions may also apply if your parents bought the property before CGT was implemented on 20 September 1985 and still remained as is. You must file for CGT, however, if that property had any major improvements or expansions built. 

Use a Family Agreement

In some cases, setting up a family agreement can help reduce stamp duty and CGT liabilities. This legal arrangement can outline the terms of the property sale and may involve a lower purchase price than the market value, reducing stamp duty costs.

Seek Professional Advice

Navigating the intricacies of tax law and property transactions can be daunting. You will need licensed property agents and tax planners into the equation as soon as you build your offer.

Property Inheritance in Australia

If your parents are looking to transfer their property as part of their estate planning, there are other considerations:

Estate Planning

Consulting with estate solicitors can help your parents create a comprehensive estate plan. This plan may include strategies to lower tax liabilities and ensure a smooth transfer of assets upon their passing.

Testamentary Trusts

Testamentary trusts are valuable in the sense they allow assets, including property, to be distributed according to your parents’ wishes while potentially minimising tax obligations for beneficiaries.

Life Insurance

Life insurance policies can provide a source of funds to cover any tax liabilities that may arise upon your parents’ passing. This can help ensure that the property remains within the family without creating a financial burden for beneficiaries.


Buying your parents’ property in Australia is a significant decision that involves various legal and financial considerations. While CGT and stamp duty are inevitable, there are legitimate ways to minimise their impact. Leveraging tax exemptions and seeking professional advice can help you navigate this process with greater ease.

However, always remember that tax laws are complex and subject to change. Therefore, it’s essential to stay informed and work closely with legal and financial professionals who can provide up-to-date guidance tailored to your unique situation. Ultimately, the goal is to create a seamless transition that preserves your family’s legacy and provides peace of mind for all involved parties.

DISCLAIMER:  This article is for informational purposes only and is not meant to constitute official financial advice. 2 Ezi has no relationships with any tax agent, property agent or the ATO.

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