Co-investing in property with your adult children: the structural decisions families miss

For many Australian retirees, helping an adult child into the housing market has become a normal part of family financial planning. With house prices in the major capitals well beyond what a salaried first-home-buyer can fund, parental capital is often what tips a deal over the line. The question is rarely whether to help; it is how to help.

Three structural choices exist, and the family's decision among them shapes every consequence that follows.

Gift. The parent transfers cash to the child, who buys the property in their own name. Simple. The cash is gone from the parent's estate; the child is the sole owner. Centrelink deprivation rules apply for five years after the gift if the parent is on Age Pension or approaching it — gifts beyond $10,000 in a year or $30,000 over five years continue to count as the parent's asset.

Loan. The parent loans cash to the child, sometimes secured by a second mortgage on the property. The parent retains a financial asset (the loan), with deemed income for Centrelink purposes. The child is the sole legal owner. The loan is repaid (or not) on terms agreed.

Co-investment. The parent and child go on the title together — in joint tenancy or, more commonly, as tenants in common with defined shares. The parent retains an identifiable property interest. The child has the home but does not own it alone.

The first two are well-trodden territory. The third — co-investment — is structurally distinct, and creates a different set of consequences that families often discover too late.

The Centrelink position. If the property is the child's home (not the parent's), the parent's share is fully assessable under the Age Pension assets test. No principal home exemption applies — the parent is not the resident. The market value of the property, multiplied by the parent's percentage share, is added to the parent's assets. For tenancy in common with defined shares, the percentage is the documented share. For joint tenancy, each owner is typically treated as owning equal proportions, regardless of who paid what.

If the property is rented (e.g., a co-owned investment property), the parent declares their proportional share of the net rental income for income test purposes. Each co-owner claims their share of expenses; interest deductions follow the borrower.

The capital gains position. When the property is eventually sold, each co-owner has their own capital gain. The parent's gain is calculated on their share of the proceeds less their share of the cost base, with the 50% CGT discount applying if the share has been held more than 12 months. The trap is the main residence exemption: if the property is the child's main residence but not the parent's, the parent's share generates fully assessable capital gain. Families regularly assume "it's the kids' home, no CGT applies" — and discover at sale that the parent's share is fully exposed.

The child's own CGT position is independent: if the property is their main residence throughout, their share may qualify for full main residence exemption. The shares are calculated separately even though the asset is the same.

The aged care funding risk. This is where co-investment most often goes wrong. When the parent eventually needs residential aged care, the parent's share of the property is an assessable asset under the aged care means test. To fund a Refundable Accommodation Deposit, the parent typically needs liquid funds — and a share in a property the child lives in is not liquid. Releasing the cash means selling the property (forcing the child out) or having the child buy out the parent's share (often impossible without significant new finance). For families where aged care is likely within 5–10 years of the co-investment, this is the structural risk that should drive the decision against co-investment in favour of a gift, loan, or the parent retaining cash.

The structural choice within co-investment. If co-investment proceeds, the legal form matters.

Joint tenancy carries a right of survivorship — on the parent's death, the child automatically becomes the sole owner, bypassing the parent's will. This is rarely appropriate for parent-child arrangements: it removes the parent's share from estate equalisation, may disadvantage other children, and can have unintended tax consequences for blended families.

Tenancy in common with defined shares is generally preferred. Each party owns a documented proportion. On the parent's death, their share passes via the will, allowing equalisation across children and integrating with broader estate planning.

A loan with second mortgage — not co-ownership at all, but worth mentioning here as an alternative. The parent keeps cash on the books (as a loan asset), the child owns the property outright, and the loan is secured against the property. This avoids many of the Centrelink and CGT complications of co-ownership while still providing an enforceable mechanism for the parent to recover the funds.

The risk register. Co-ownership creates several risks beyond the ones above:

• Child's relationship breakdown. Family law proceedings can affect the property; the parent's share may need defending.
• Child's bankruptcy. Creditor action against the child's share can force partition.
• Disagreement over sale. Without an agreement, partition action is the legal remedy — expensive and family-relationship-damaging.
• Insurance and maintenance disputes. Joint owners share responsibility for major expenses.

A well-drafted co-ownership agreement addresses these risks: rights to compel sale, dispute resolution mechanisms, expense sharing, first right of refusal on the other party's share. This document should be drafted and signed before settlement, not after.

The estate planning dimension. Where one child has been helped via co-investment, the parent's will needs to address this explicitly. Without explicit treatment, family disputes become likely. Options include: counting the co-investment toward the recipient child's share of the estate; providing buy-out rights at market value with proceeds going to the estate for distribution; and explicit equalisation provisions for other children. Family provision claims by other children — particularly those who feel disadvantaged — are a real risk in jurisdictions where adult children can claim against the estate.

When co-investment is right — and when it isn't. Co-investment is more appropriate where the parent has resources beyond what they will need for retirement income and aged care; where the family is communicative; where the child's housing need is genuine; and where mechanisms to unwind exist. It is more risky where the parent's resources are tight, family relationships are strained, the child's relationship is unstable, or no agreement is in place.

For some families, the right answer is a different structure altogether — a gift up to deprivation thresholds, a properly documented loan, or simply leaving the child to make the purchase on their own. The instinct that "going on the title" is the way to help can be the wrong instinct. The decision should be made with eyes open to what the structure actually means.

Sources

• Services Australia — How much you can gift (Age Pension)
• Services Australia — Real estate assets (Age Pension assets test)
• ATO — CGT discount
• ATO — Eligibility for main residence exemption
• Department of Health, Disability and Ageing — Means assessment for residential aged care
• My Aged Care — Understanding aged care home accommodation costs (RAD)