Buying property in your children's names in Australia

Thinking of investing in real estate in Australia, but for your children rather than yourself? Whether its their first home or an investment opportunity, this is a forward-thinking way to give your kids a nest egg when they come of age.

But how exactly does it work, to buy property in your children’s names in Australia? In this guide, we’ll give you an overview of the process, along with the legal and practical issues you’ll need to consider.

We’ll also look at how best to pay for the costs of buying a property in Australia, particularly if you’re an overseas buyer. For example, get a Wise multi-currency account and you could save a small fortune on fees and exchange rates when sending your money to Australia.

But more on this later. Let’s start with a quick overview of the property buying process in Australia.

Buying property in Australia

The first thing for any prospective property buyer to do is to take stock of their finances. You need to work out what you can afford to borrow and put down as a deposit, before you start searching for a property.

Now that you’ve done your sums, it’s time to start house hunting. Once you’ve found one, here’s what to do next¹:

1. It’s a good idea at this point to line up a settlement agent or conveyancer (who must be licensed to operate in the state) to handle the legal stuff. Also, a mortgage broker to find you the best home loan.

2. Getting pre-approval for a home loan is a smart idea. Good properties don’t stay on the market for long, and pre-approved buyers are more likely to have their offers accepted.

3. Get a building inspection to make sure your dream property is up to standard. If any repairs are needed, you can potentially negotiate on the purchase price.

4. If you’re happy with the property, put in a private sale offer with the owner or their real estate agent, or buy at auction.

5. Contracts are exchanged. Have your conveyancer check the contract over and make changes if needed, then the rest of the conveyancing work can go ahead.

6. It’s all leading up to settlement day, which is when funds are transferred and you receive a title of ownership and the keys to your property.

You’ll also need to know about the fees for buying a property in Australia. Here are the main fees you can expect to pay²:

• 10-20% deposit (put down less than a 20% deposit and you may need to pay Lender’s Mortgage Insurance on top)
• Stamp duty
• Legal and conveyancer fees
• Commission to mortgage broker and/or buyer’s agent (if using)
• Building inspection costs.

Is the buying process different for overseas buyers?³

If you aren’t an Australian resident or citizen, the property buying process is broadly the same – but with one key difference.

You will need to seek approval from the Foreign Investment Review Board (FIRB). Fail to do so and you could face severe penalties, and you’ll also find it difficult to secure a home loan.

Foreign buyers also face restrictions on the type of properties they can buy. Unless you’re a resident, you may only buy new properties (unless you plan to demolish an established property and build a new one within 4 years).

Buying property in Australia in your children’s name

So, we’ve covered the process of buying property in Australia for yourself – whether you’re a local or overseas buyer. But what about buying it in someone else’s name?

There are a number of reasons you might want to do this. Some parents want to give their children an early foot on the property ladder, so they have a home to live in when they come of age. For others, the property is an investment decision.

If you’re planning to buy a property for your child, here’s what you need to know:

• It is legal for a minor to own property in Australia⁴. The Title Deed will simply include ‘a minor born on…’ after their name to identify the owner of the property. When the child turns 18, this sentence will be removed upon production of a valid birth certificate and other relevant documentation at the Titles Office.

• Until your child turns 18, you won’t be able to sell the property without court approval⁵. This can potentially be both difficult and expensive.

• If you plan to earn rental income on the property, this will be subject to an eye-watering tax rate of around 46%. This is because it’s classified as ‘unearned income’ by a minor⁶.

• As your child’s legal representative, you will be responsible for maintaining the property⁷.

• You can also choose to buy property for your child using a family trust⁸. This is where one or more parents are named as trustees, until the child is old enough and control of the trust can be passed over.

Finding your dream property

With all the legal and practical considerations out the way, it’s time to start your property search.

Here are some of the most popular websites to try:

• MyRealEstate.com.au⁹ – there are a few too many ads, but you will see properties from all major real estate agent websites and portals. There are also lots of ways to search, including using search terms.

• Domain.com.au¹⁰ – with simple search criteria but a good selection of properties, this search portal also lets you save search criteria and get updates when matching properties go on the market.

• Homesales.com.au – along with a good property search tool, you can also access property market news, buyer tools and advice here.

• Property.com.au – a quick, straightforward property search portal, allowing you to search using multiple criteria including budget, property type, location and more.

If you’re an overseas buyer, it could be worth using a buyer’s agent to scour the market for your dream property. You will need to pay them a fee or commission, but they can do the research, viewings and other work for you. This is super handy if you live in a different country and can’t carry out your search in person.

Getting your money to Australia

After all the hard work you’ve put into finding and buying your dream property, it would be a shame to fall at the last hurdle – paying for it.

If you’re an overseas buyer, you’ll need to find cost-effective ways to pay your deposit. Also, you’ll have conveyancer, mortgage broker and possible buyer’s agent costs to cover.

So, what’s the cheapest way to get your money over to Australia? Do it through your bank and you could face expensive fees and terrible exchange rates. Which, when sending such large sums, could prove seriously costly.

Wise is a whopping 7x cheaper than Australian banks¹¹ for sending money overseas. This is mainly because with your multi-currency account, you are always guaranteed the real, mid-market exchange rate. This is the rate that banks use with each other, so it’s the fairest rate you can get. Many banks and money exchange services add a mark-up on top, making it more expensive for you.

Send money to your conveyancer, mortgage broker, building inspector or even the property owner in Australia, and you’ll only pay small, transparent fees. Thanks to the great exchange rate, it often works out the cheapest option even with these fees.

Open a Wise borderless account and see the savings for yourself. You’ll even get a linked debit Mastercard so you can spend like a local anywhere in the world. And if you’re due any money in the property buying process (such as a refund, for example), you can receive money with zero fees.

After reading this guide, you should have a good idea of how to buy a property in Australia in your child’s name. We’ve looked at the ordinary process for both local and overseas buyers, plus the legal, tax and other considerations of buying a property in someone else’s name.

But remember that this is a big decision which will have long-term implications, so it’s really important to take your time and do as much additional research as possible. Getting advice from a lawyer is recommended, to help you make the right choices.

Good luck with your property search!

Sources used:

Sources checked on 18-October 2020.