Helping the next generation into property
The so-called Bank of Mum and Dad has become one of the more significant, if informal, forces in the Australian property market. The role parents and grandparents play in getting adult children into property has shifted considerably over the past decade. What was once an occasional act of generosity has become, for many families, a planning necessity. Property prices across most Australian capital cities have moved well beyond what a single income, or even a dual income without existing equity, can comfortably service. The result is that a substantial proportion of first-home buyers now rely on family support in some form, whether that is a direct gift, a guarantor arrangement, or some form of co-purchase.
That is not inherently a problem. But it does mean these decisions deserve the same planning attention as any other significant financial commitment. The tax environment, in particular, has just shifted materially, and the implications for families thinking through these arrangements are worth understanding before any decisions are made.
The traditional approaches and what they cost you
The most common forms of family support each carry distinct financial consequences that are easy to overlook in the moment.
Gifting, whether framed as an early inheritance or a straightforward transfer of funds, is the simplest approach on the surface. There is no gift tax in Australia, which leads many people to assume there are no financial consequences at all. For retirees or near-retirees, however, the Age Pension rules can change that picture. A gift above $10,000 in a financial year, or $30,000 over five years, is subject to the Assets Test under the deprivation provisions, meaning the gifted amount continues to be assessed as an asset for five years regardless of the fact the money is gone. Timing matters here, and it is worth mapping the implications before the transfer occurs rather than after.
Guarantor arrangements, where a parent or grandparent offers their own property as security for a child's loan rather than contributing cash, have become popular as a way to avoid the lump-sum commitment. The appeal is understandable, but the exposure is real. A guarantor is not a co-signatory in name only; they carry full liability for the loan if the borrower cannot service it. Understanding the size of the guarantee, whether it is limited or unlimited, and the conditions under which it can be released is essential before signing anything.
Co-purchasing as joint tenants or tenants in common is more involved again. Joint tenancy creates a right of survivorship, meaning the deceased's share passes automatically to the surviving owner rather than through the estate. Tenants in common allows each party to hold a defined proportion and dispose of it independently, including by will. The choice between them has estate planning consequences that are often not considered until much later.
In all three cases, the question of fairness among siblings, if there are more than one, tends to surface eventually. A documented loan rather than a gift, or a formal deed of gift acknowledged in an updated will, is often the better path for preserving family relationships as well as managing the finances.
What the 2026 budget changes
Two measures announced in the 2026-27 Federal Budget, neither yet legislated, are directly relevant to families thinking through property arrangements.
The first is the proposed replacement of the 50% capital gains tax discount with cost-base indexation and a 30% minimum tax rate on capital gains, intended to apply to gains accruing from 1 July 2027. The current 50% discount continues to apply to gains arising before that date. For a parent holding an investment property they had considered transferring or restructuring as part of a broader plan to help an adult child, the window before 1 July 2027 may be the more favourable time to act. This is worth modelling with specific numbers rather than treating as a general principle.
The second measure is a proposed 30% minimum tax on the taxable income of discretionary trusts, intended to apply from 1 July 2028, with no grandfathering for existing trust structures. This matters because family trusts are commonly used in co-purchase arrangements, particularly in fractional ownership structures. One of the main attractions of distributing income through a discretionary trust is the ability to direct it to beneficiaries on lower marginal rates. That flexibility would be substantially reduced under the proposed rules. Anyone currently using or planning to use a trust structure for a co-purchase arrangement should review the implications before 2028, and ideally before committing to the structure at all.
The newer models and where they fit
Beyond the traditional family-support arrangements, a number of alternative ownership models have emerged that are worth understanding, particularly if direct financial support is not straightforward.
Build-to-rent-to-buy schemes allow a tenant to rent a newly constructed property with an option to purchase after a set period. The rental phase provides additional time to save and can offer a degree of housing security that standard leases do not. The costs and contractual conditions vary considerably between providers, and the option to purchase is not guaranteed to remain favourable if circumstances change. These properties are typically new builds, which means they currently sit on the more favourable side of both the negative gearing and capital gains tax changes proposed in the budget.
Community land trusts separate the ownership of land from the ownership of the dwelling. A not-for-profit trust retains the land, and the purchaser buys only the building. The reduced purchase price can make entry to the market achievable for people on moderate incomes. The trade-off is a capped resale value, designed to keep the property affordable for future buyers, and an ongoing land lease fee. These arrangements are niche but growing in Australia, and lender appetite has improved as the model has become better understood.
Fractional ownership involves multiple buyers holding shares in a property through a legal structure, typically a company or trust. The entry cost is lower, and the ongoing expenses are shared. The complexity, however, is meaningful. Decisions about the property are governed by a legal agreement among co-owners, and disagreements can be difficult and expensive to resolve. Financing arrangements for these structures can also attract different terms than standard residential mortgages. Given the proposed discretionary trust minimum tax, the structure chosen for a fractional arrangement warrants careful consideration.
The planning questions worth asking before you commit
Regardless of which approach a family is considering, several questions are worth working through before any money changes hands or documents are signed.
First, what is the effect on your own retirement plan if liquidity is reduced or an asset is committed as security? A guarantor arrangement or a significant gift can sit comfortably within a retirement plan at current asset values, and create pressure if those values shift or if unexpected costs arise.
Second, how does the arrangement interact with your estate plan? Property transfers, loans, and guarantor arrangements all have implications for what passes to whom and on what terms. If the support is intended to be a fair share of an eventual inheritance, documenting that intent reduces the risk of disputes later.
Third, is the arrangement structured correctly for the tax environment you are actually entering, not the one that existed a few years ago? The budget changes, if legislated, alter the calculus for both capital gains tax events and trust-distributed income in ways that are material enough to change which structure makes sense.
None of this is to suggest that helping family into property is inadvisable. For many people, it is one of the most meaningful things they can do with accumulated wealth. The point is that it benefits from the same considered approach as any other financial decision.
If you are working through the options for your own family, I am happy to talk through the specifics with you.