How to pass on property to parents in Australia

The difference of the question

It is customary in China for parents to buy property for their children and register it in the child's name before they walk down the aisle, to ensure that the property is pre-nuptial and to avoid division if the marriage goes wrong. The practice is not universal, however.

Let's look at a specific case: Mr. and Mrs. Zhang's daughter holds Australian citizenship and currently lives in Australia. Although unmarried, she lives with her partner and has a son. Zhang and his wife bought a beach house in Sydney with the aim of enjoying Australian life in retirement, hoping their daughter would inherit the property when they died. Currently, the property is registered as jointly owned by Mr. Zhang and his daughter.

From the point of view of asset protection, what risks might arise from this decision by Zhang and his wife? If they are aware of these risks and want to change ownership, what challenges do they face? This concerns a number of areas of Australian law, such as property law, marriage and family law, and tax law.

Analysis of Australian property law.

In Australia, property ownership can take two forms: joint tenancy and tenancy in common.

Joint tenancy means that the title to the property is jointly held by two people, and is usually applied to a couple. When one party dies, the property automatically passes to the other and cannot be inherited by will. It can only be inherited through a will if one spouse dies and the other spouse owns the property outright.

Tenancy in common allows all parties to jointly own the property on a percentage basis, for example, a couple can own the property on a 50-50 basis. Each party is free to dispose of its share, or to arrange for succession through a will.

The risk in this case is that Mr. Zhang and his daughter hold the property in common. In the event of Zhang's death, the daughter will automatically receive all the property, which will not be distributed as an estate. Even if Mr. Zhang had named Mrs. Zhang in his will to inherit all his property, Mrs. Zhang would not be entitled to the property. If Zhang wishes to claim her rights, she may need to go through legal channels to prove that the property is community property, which is time-consuming and costly, with uncertain results.

Analysis of Marriage and Family Law in Australia

Unlike the Chinese market, Australian law recognizes and protects de facto relationships. If the couple have lived together for more than two years, it may be considered a de facto marriage. At the time of separation, one party may claim a division of the other's property. Australian courts divide property based on factors such as family contributions.

In addition, even if a prenuptial agreement is signed, Australian courts may consider that the agreement is not binding on the ownership of the prenup, as living together and family expenses can lead to property confusion over time.

The risk in this case is that the daughter is already living with her partner and has a son. If the couple split up, the partner may be entitled to claim a share of the daughter's property. This would be completely different from Mr. Zhang's original idea.

Tax Consideration of Property Transfer in Australia

If Mr. and Mrs. Cheung now want to change the title of the property to Mr. and Mrs. Cheung, they may have to pay hefty stamp duty.

Therefore, when purchasing a property in Australia, it is recommended that the property be registered as joint or joint ownership by Mr. and Mrs. Cheung. This way, the property is in their name and a change in the daughter's marriage or de facto marriage does not affect the property. At the same time, there is no inheritance tax in Australia and owner-occupied homes enjoy tax incentives, typically no land tax and no capital gains tax on the sale of a home.

although individual cases cannot represent all, the matter of Mr. and Mrs. Zhang also gave us a little "shock". Some things may not turn out the way we originally planned them. It is therefore crucial to have a long-term plan in place before buying an Australian property. If Mr. and Mrs. Cheung wish to buy property in Australia for their retirement and pass it on to their daughter on death, they can consider holding the assets through a family trust. Family trusts are tax flexible and very effective at asset protection. Even if Mr. Cheung goes bankrupt, creditors cannot pursue assets held in a family trust, which is safer than registering the property in the names of Mr. and Mrs. Cheung.

That's why it's so important to hire an experienced attorney to tell you what you are looking for, and then a real estate attorney can come up with the best solution for you.