Can You Put a House in a Child’s Name Under 18?
In Australia, it is legally allowed to put a house in a child’s name, but there are important legal, financial, and tax issues to consider. Since children under 18 can’t directly manage property, a trust is often set up where a responsible adult oversees the property until the child is of age. This process can be complex, involving tax rules, legal restrictions, and planning for the future.
How to Own Property for a Child
Parents or guardians typically manage property for a child under 18 through a trust or similar arrangement:
- Trust Accounts: A trustee, often a parent, manages the property until the child turns 18.
- Legal Restrictions: The child can’t sell or mortgage the property until they turn 18.
- Nominee Ownership: Sometimes, parents are listed as custodians while the property remains in the child’s name.
Key Tip: Trusts are the most common way to manage property for children, ensuring it is protected until they’re old enough to handle it.
Tax Implications
Owning property in a child’s name can create tax complications, Australian tax laws impose strict rules on minors earning income from investments, including rental properties.
- Capital Gains Tax (CGT): If the property is sold, profits may be subject to CGT, even if owned by a minor.
- Income Tax: Rental income from the property might be taxed at high rates under rules for minors’ unearned income.
- Stamp Duty: Buying or transferring property into a child’s name may involve state-specific stamp duty costs.
Key Tip: Tax obligations can be significant, so careful planning is needed to reduce liabilities.
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Legal and Financial Risks
There are risks involved in buying or transferring property for a child:
- Family Law Issues: If the family goes through divorce or financial hardship, the child’s property may be part of legal disputes.
- Restrictions on Use: Children under 18 cannot independently sell, lease, or manage the property.
- Long-Term Planning: Parents need to ensure that property ownership fits with future financial and inheritance plans.
Key Tip: Consider family dynamics and potential legal risks before deciding to put property in a child’s name.
Alternatives to Putting Property in a Child’s Name
Instead of directly putting property in a child’s name, families might explore other ways to help with future property ownership:
- Co-Ownership: Parents and children buy property together, sharing ownership.
- Family Trusts: A discretionary trust can hold property for the child’s benefit, offering flexibility and tax advantages.
- Gifting: Parents can provide money or loans to help children buy property when they’re older.
Key Tip: Alternative strategies may avoid legal complications while still supporting a child’s financial future.
Final Thoughts
While it’s possible to put a house in a child’s name under 18, the process is complex. Trusts are a common solution but come with legal, tax, and financial considerations.
For many families, strategies like co-ownership, family trusts, or financial gifts offer more flexibility and practicality while supporting children’s long-term goals. Consulting legal and financial professionals can help you choose the best option for your situation.
