Buying an investment property in your child's name to get the FHOG

[burto]

I have a question for the property & tax gurus on this forum.

A close friend of mine recently told me her parents were wanting to buy an investment property in her name to get access to the FHOG before it expires (we are in Victoria). She is currently at uni, lives with her parents, works casually 2 or 3 shifts per week and gets youth allowance.

She is a bit panicked because this is happening very quickly and she is nervous about the implications it will have on her own situation (youth allowance, ability to borrow in the future etc).

I am hoping somebody can fill me in on the implications for my friend. My current (limited) understand is:

- She will lose the youth allowance given it is means tested on assets (will this change if the property is highly geared with minimal equity?)
- She won't be able to get any FHOG in the future
- Depending on how much the parents borrow to fund the property, she may have trouble getting finance for her own property in the future
- She will not be able to claim the main residence CGT exemption on the property given it will be rented out straight away
- She will be liable if her parents don't make the mortgage payments thus credit history could suffer
- She will be legally liable for all taxes levied on the property (land tax, rates - have I missed any?)

If anybody can assist, that would be greatly appreciated. Really just hoping to understand the implications for her, not her parents.

 

[Nardz]

i'm no expert, but for youth allowance you would expect it will depend on how much equity they're putting into the asset.

defintely won't be able to get FHOG anymore. and if she gets married nor will her partner.

I'm guessing they'll be doing a family guaranteed loan. so they'll be committing at least 20% of their own equity to pay for the deposit, and then probably the FHOG on top of that. so say she gets a $500k home, she'll have 100k + the FHOG paid off in the house.

the home can't be rented out straight away. FHOG stipulates that she has to be her primary place of residence for at least 6 months starting within the first 12 months.

and yes, she's liable for everything. but she owns the home, not her parents.

 

[checkraiseulite]

No expert either, but here's my thoughts:

- Your friend will make receive more $ in centrelink benefits next year than the FHOG is worth.
- If it's bought in your friend's name, it can't be rented out straight away, and the parents can't negative gear it.
- Potential for ownership/other issues later if your friend buys it in their name.
- Your friend doesn't want to do it by the sounds of it.
- Potentially better FHOG schemes may arise in the future if (when) the housing market shows signs of tanking.

I wouldn't be doing this if I were your friend, I'd just tell her to tell her parents it's not worth it to save $7k at the cost of potentially affecting their daughter's financial future and their relationship with her.

 

[candiehappy]

I don't know anything about youth allowance, but you are correct on the other points.

Unless they are paying cash I wouldn't do it.

 

[Nardz]

But let's be real.. We don't know the full story. They might be telling her that it will be her house and that they will just make the repayments until she can take over.. And the fhog might be 20k if they're building..

Everyone is assuming the parents are doing it for their own gain but they may very well have their daughters interests in mind

 

[Visions]

Just to make it clear, the FHOG of $7,000 is not disappearing, it is the first home owners bonus (FHOB) in Victoria for new homes and regional areas that is ending. The $7000 grant is ongoing, so if that is the prime reason that they want your friend to purchase property, there is no need at the moment. Part of the requirements also require the purchaser to live in the property purchased within 12 months of purchase date.