Article by Justyna Balowska Byfields Associate
If you’re considering buying a home in town choosing the right way to own that property is crucial. It affects your taxes, asset protection, and how easy it is to pass the home on to your children one day.
Some options to consider
Buy it in your personal names
This is often the simplest and best choice if you plan to live in the home. You may qualify for the main residence CGT exemption, meaning no tax on any capital gain when you sell. You’ll also likely get land tax exemptions. If the property is not your main residence but is held for more than 12 months, you may be eligible for the 50% CGT discount. Just remember, the property could be exposed to personal legal claims, and gifting it to your kids during your lifetime may trigger taxes.
Buy it in a trust
Trusts offer flexibility to distribute rental income or profits among family members, along with strong asset protection. They also simplify succession planning by allowing properties to be passed to the next generation without triggering capital gains tax or stamp duty. However, if you live in the property, you generally won’t qualify for the main residence CGT or land tax exemptions. Trusts do come with added costs and more paperwork to manage.
Buy through your existing farm entity
Mixing farm and personal assets can complicate succession planning and expose the property to risks from business-related claims. It’s generally best to keep these assets separate.
Buy through a Self-Managed Super Fund (SMSF)
This isn’t an option if you want to live in the house or use it as a holiday house, as SMSFs can only hold investment properties.
Financing Considerations
Using farm assets to secure a loan for a house in town can be tricky. It’s important to speak with your bank manager early to understand the financing options available and how they might impact your farm cash flow. While interest on the loan often isn’t tax deductible, with the right setup, it might be in some cases, so structuring matters.
Residency Matters
To qualify for the main residence CGT exemption, you must genuinely live in the property. It helps to update your driver’s licence, electoral roll, and postal address to reflect this. But remember -these alone don’t guarantee eligibility.
Still unsure which way to go?
There’s no one-size-fits-all answer, the best option depends on your goals, how the property will be used, and your broader family and business structure. That’s where we come in.
Talk to your Byfields advisor today - because when the dust settles, it’s the right structure that makes all the difference.