Buying Property From Family or a Related Party: What Lenders Do
Property Lending
Buying from family · Gifted equity · Valuation · Duty · CGT
Buying from parents below market value can create usable equity, but the lender, revenue office, ATO and Services Australia do not all use the same number. This guide shows what changes before the contract, at settlement and after you own the property.
Quick Answer
When you buy a home from family below market value, some lender and mortgage-insurer policies can treat the gap between the accepted valuation and the contract price as equity. Under Helia's current favourable-purchase LMI standard, the LVR is based on the valuation while the insured loan cannot exceed the contract price. Individual lender policy can be tighter. Transfer duty, CGT, first-home schemes, pension rules and any right for the seller to keep living there are separate tests.
Also searched as: buying your parents' house below market value, favourable purchase, advantageous purchase, gifted equity, non-arm's-length purchase and related-party property transfer. These phrases overlap but are not identical legal definitions. This guide covers family and connected-party property transfers in Australia. It does not cover an SMSF acquiring property from a related party, which is a separate superannuation-law question.
Does the bank use market value or the purchase price when you buy from family?
There is no single lender-wide rule, but a recognised favourable-purchase policy can use the valuation for LVR while still limiting the loan to the contract price. APRA permits non-arm's-length transactions to sit outside the ordinary purchase-price cap used for regulatory LVR purposes. Helia's current LMI standard then publishes one concrete residential treatment: maximum LVR is based on the valuation, the insured loan cannot exceed 100 per cent of the purchase or contract price, and lender policy may still be tighter.
What does APRA actually say about related-party purchases?
APRA's Prudential Standard APS 112 says that, for an ordinary property purchase, the value used for LVR purposes must not be higher than the effective purchase price, except for non-arm's-length transactions. That is an exception to the ordinary regulatory cap. It does not require every lender to use the higher valuation and it does not promise approval. The individual lender still decides which credit policy applies.
Can you borrow more than the family purchase price?
Not under the Helia favourable-purchase treatment described here. Its current standard says the insured loan amount must not exceed 100 per cent of the purchase or contract price. That is why the family discount can create equity without becoming cash in your account at settlement. A later refinance or equity release is a separate credit application, covered in section 10.
You will also meet a figure that reads as a flat contradiction of this. Several broker and comparison sites state that a lender may advance up to 105 per cent of the purchase price on a favourable purchase. That number does not appear in the published underwriting standard, which caps the insured loan at 100 per cent of the purchase or contract price. Where something above 100 is being quoted, it generally describes an amount added on top of the loan rather than cash the discount releases to you, such as capitalised mortgage insurance and costs, or a structure with a guarantor behind it. One question settles it: what exactly is inside that number, and how much of it reaches your account at settlement?
The published rules to separate
- APRA exceptionFor an ordinary purchase, property value for regulatory LVR purposes cannot exceed the effective purchase price, except for a non-arm's-length transaction. APRA APS 112, Attachment A, paragraph 11 and footnote 6. This is a prudential rule, not a lender approval promise.
- Helia LVRFor its non-arm's-length and advantageous or favourable purchase treatment, maximum LVR is 95 per cent or the lower product or purpose limit, based on the valuation rather than purchase price. Helia LMI underwriting standards and guidelines, section 8.3.13, effective 10 August 2026.
- Helia capThe insured loan amount must not exceed 100 per cent of the purchase or contract price. Same current Helia section. The security specified there is one single-occupancy dwelling on one title.
Helia describes its guidelines as minimum acceptable requirements for LMI proposals and says proposals outside them may be considered on individual merit. Your lender's own policy sits on top of the insurer standard.
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| Question | Value or test | Important qualification |
|---|---|---|
| Residential favourable-purchase LVR under Helia's current standard | Qualified valuation | Lender policy can be tighter and another lender or insurer may use a different policy. |
| Maximum insured loan under that Helia treatment | No more than the contract price | This does not mean all costs are funded or that the borrower needs no cash. |
| Transfer duty base | Generally the higher of consideration and market value | Apply any state-specific exemption or concession afterwards. |
| Seller's CGT calculation | Market value may be substituted | Actual taxable gain still depends on cost base and exemptions, including the main-residence exemption. |
| Social-security gifting | The value given away can matter | Granny flat interests and other exceptions can change the treatment. |
Worked example: buying your parents' home below market value
Primary sources checked 18 September 2026: APRA APS 112; Helia's current LMI guidelines page and the guidelines effective 10 August 2026.
Does the family discount count as your deposit, and will you pay LMI?
The discount can create equity for LVR purposes, but it does not automatically satisfy every cash contribution, savings or scheme rule. It can solve the deposit-equity problem while leaving serviceability, transfer duty, legal costs and cash-at-settlement requirements completely unchanged.
Is gifted equity the same as a family guarantee?
No. Gifted equity is the value your family permanently gives up by accepting less than the lender-accepted market value. A family guarantee is a separate credit structure where another person guarantees part of the debt or provides additional security. A favourable purchase can sometimes make a guarantee unnecessary because the property already contains enough accepted equity, but the two structures solve the problem differently.
Will you still pay lenders mortgage insurance?
Maybe. LMI depends on the lender, the policy, the resulting LVR and whether another structure applies. A large family discount can push the LVR below the lender's LMI threshold. A smaller discount may not. The correct question is not "does a family purchase avoid LMI?" but "what LVR does this lender recognise on this transaction, and what LMI rule does that product use?"
Do you need your own savings as well?
Sometimes. Helia's current public standard says that where a standard product exceeds 90 per cent base LVR, the lender must validate 5 per cent deposit funds from an acceptable source and those funds must be held in the borrower's name at application. Its acceptable sources include bank savings, First Home Super Saver Scheme funds, equity or sale proceeds, some superannuation funds, shares, immediate-family gifts, bonuses, tax refunds, inheritances, sale of assets, the First Home Owner Grant and funds held in company or business accounts. Individual lenders can apply their own contribution or savings policy on top.
Does no cash deposit mean you need no cash?
No. Even where the loan covers the full contract price, transfer duty can still be based on market value, and there can be conveyancing, registration, adjustment, inspection and other settlement costs. If the property sits inside a first-home scheme, that scheme may also impose its own saved-deposit requirement. Work out the cash to complete, not just the loan-to-value ratio.
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| Structure | What it can help with | What it does not automatically solve |
|---|---|---|
| Family discount or gifted equity | Can reduce recognised LVR under a favourable-purchase policy. | Serviceability, duty, legal costs, lender cash-contribution rules or scheme rules. |
| Cash gift from family | Can add real cash to the deposit or settlement pool if the lender accepts the source. | Whether the property is valued as expected or whether the borrower can service the loan. |
| Family guarantee | Can provide additional security for part of the debt. | The guarantor's risk, borrower serviceability or transfer-duty and tax questions. |
| Australian Government 5% Deposit Scheme | Can remove LMI for an eligible first home buyer using a Participating Lender. | The Scheme's saved-deposit, price-cap, owner-occupier and lender-credit requirements. |
Source: Helia LMI underwriting standards and guidelines, sections 7.1 and 8.3.13, effective 10 August 2026. The 5% Deposit Scheme is covered separately in section 7 because it has its own rules.
Who counts as a related party, and what does gifted equity mean in Australia?
There is no single definition that controls lending, duty, tax and social security at the same time. "Favourable purchase" and "advantageous purchase" are underwriting terms; "gifted equity" is common customer and broker language for the value given up in a below-market family sale; "non-arm's-length" is used in prudential and tax contexts; and revenue offices have their own associated-person rules.
Who does a lender treat as related family?
The safest answer is that it is policy specific. Helia's current deposit-funds section refers to gifts from an "Immediate Family Member", while the favourable-purchase section deals with non-arm's-length transactions without publishing a universal family tree. Parents, children and siblings are the clearest examples. For grandparents, aunts, uncles, cousins, in-laws or connected entities, get the lender's position in writing rather than assuming the relationship fits.
Is gifted equity an Australian term?
Yes, it is useful Australian search and broker language, even though the formal Helia heading is "Non-Arm's Length Transactions and Advantageous / Favourable Purchases". Use both when explaining the file: the formal policy term tells the credit team what rule you are relying on, and "gifted equity" tells the family what the price-to-value gap actually does.
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| Term | Who commonly uses it | What it means here |
|---|---|---|
| Favourable or advantageous purchase | Lenders and mortgage insurers | A below-market or connected-party purchase assessed under a specific credit or LMI policy. |
| Gifted equity | Borrowers, brokers and consumer material | The value the seller gives up by accepting a price below the accepted market value. |
| Non-arm's-length transaction | APRA, tax and credit policy | A transaction where the parties are not dealing independently in the ordinary market sense. |
| Related or associated persons | State revenue offices | A jurisdiction-specific relationship used for duty and evidence rules. |
| Market-value substitution | ATO | A CGT rule that can substitute market value for what was actually received. |
| Deprivation or gifting | Social-security system | Treatment that can apply where an asset is transferred for less than adequate value. |
Does the same favourable-purchase rule apply to companies, trusts or commercial property?
No. Do not carry the residential favourable-purchase rule across automatically. The Helia rule used in sections 1 and 2 specifies one single-occupancy dwelling on one title. A company or trust can have separate borrower requirements, and a commercial workshop, office or other business premises sits under commercial or business credit policy rather than this residential LMI rule.
What if a company or trust is buying a residential property?
The entity structure changes the underwriting even where the security is residential. Expect the lender to ask about directors, trustees, beneficiaries, guarantees and who actually services the debt. The presence of a related-party discount does not remove those entity checks, and first-home buyer concessions and the Australian Government 5% Deposit Scheme generally target individual owner-occupiers rather than entity purchasers.
What if the property is a workshop, office or commercial premises?
Treat it as a related-party commercial property transaction and ask the commercial lender how it sets value, gearing and required contribution. Do not quote the residential Helia 95 per cent figure or its contract-price cap as though they govern the commercial loan. The tax and duty question can still involve market value, but the finance rulebook has changed.
What if the seller is your own company or trust?
That adds connected-party evidence and tax-structure questions on the seller side. The lender may want to understand the ownership and control of both sides, the commercial reason for the transfer and how the transaction is documented. The revenue office can also have separate reconstruction or group-concession rules, which are not the same thing as a family discount.
Is this the same as an SMSF related-party purchase?
No. An SMSF acquiring an asset from a related party is governed by superannuation law and its own exceptions. Nothing in the residential favourable-purchase rule should be read as permission for an SMSF transaction. If that is the actual structure, start with specialist SMSF legal and tax advice and then deal with finance separately.
What does the lender need before it will approve a family purchase?
The lender needs the relationship and the real economics disclosed early, then it still assesses the borrower and property like a credit decision. Under Helia's current favourable-purchase standard, the lender confirms the transaction details in writing and ensures the qualified valuer records both the purchase price and the nature of the transaction. Exact documents vary by lender.
Does the contract have to say it is a related-party purchase?
Do not assume one universal contract clause exists. What is universal for a clean application is that the lender must be told the parties are related and the file must consistently describe the same transaction. Helia requires the lender to confirm the details in writing and the qualified valuer to note the price and nature of the transaction. Your solicitor should draft the contract for the state and the actual deal rather than copying a lender phrase into it.
What documents does the lender usually need?
Expect the normal income and serviceability evidence, the contract or transfer documents, identity and relationship information, source-of-funds evidence, and a valuation that clearly records the below-market or connected-party nature of the purchase. A cash gift, a price discount and a repayable family loan are three different things, so the paperwork must say which one actually exists.
Can I buy my parents' house for what they still owe the bank?
It can be possible. The ATO's own example is a parent selling a rental property to a son for the $120,000 mortgage balance when the property was worth $450,000. For CGT, the ATO used the $450,000 market value, not the $120,000 family price. From a settlement perspective, get the seller's current payout figure early. If the price is not enough to discharge the mortgage and costs, the seller needs another source for the shortfall before settlement can complete.
Can I take over my parents' mortgage when I buy their house?
Usually, do not plan on simply taking over the existing home loan. The parent's mortgage is secured against their title and normally has to be discharged as part of the transfer, while the buyer obtains finance in their own name and is assessed under the lender's current credit policy. A lender can have a process for changing borrowers or ownership in limited situations, but a family sale should not be structured on the assumption that the old loan automatically follows the property.
The practical sequence is to obtain the seller's payout figure, confirm the sale price and market value, work out the buyer's new loan, and make sure settlement funds are enough to discharge the seller's mortgage before title transfers. If the parents owe close to the family sale price, the gifted-equity idea can still exist on paper while leaving very little cash for their next home or other costs.
Can my parents leave part of the price owing as vendor finance?
Possibly under a different structure, but do not bolt it onto a standard favourable-purchase loan without checking. Helia's current LMI guide lists vendor finance as an unacceptable loan purpose for its LMI. Another lender may take a different view, but it needs to be structured openly. If the family expects repayment, it is a liability and should not be presented to the lender as an unconditional gift.
What actually makes a family purchase fall over?
The recurring problems are more ordinary than the family relationship: the borrower cannot service the required loan, the valuation is lower than everyone expected, the cash to complete duty and costs is missing, source-of-funds evidence conflicts with what the lender was told, the seller's mortgage payout is too high, the security does not fit policy, or an ongoing right for the seller to occupy the property appears late. If valuation is the issue, the valuation shortfall at settlement guide shows what changes next.
From our broking, indicative
The family discount is rarely the hard part once it is documented. The hard part is usually one of four things around it, in the order we see them:
- the buyer can afford the deposit equation but not the loan amount
- duty and costs create a cash shortfall even though the LVR looks strong
- the seller needs more cash than the discounted price leaves them with
- someone assumes the family relationship lets them skip normal property or legal due diligence
Practitioner observation only. Every approval and document requirement is lender and file specific.
Primary sources, read at the publishers on 18 September 2026: Helia current guidelines, section 8.3.13 and section 4.3 on vendor finance; ATO, transferring property to family or friends; NAB, home-loan application and approval process.
Do you pay stamp duty and CGT on the family price or market value?
For transfer duty, the starting value is generally the higher of what you pay and market value; for CGT, the ATO can substitute market value where the family deal is not at arm's length. Those are starting rules, not a statement that no concession or exemption can apply. The buyer's duty outcome is state specific, while the seller's actual capital gain depends on cost base and any CGT exemption.
Is stamp duty based on the family price or market value?
On the base rule, market value wins whenever it is higher. Revenue NSW says dutiable value is the higher of purchase price and market value and specifically gives a family-transfer example where duty is charged on the higher market value. Other states and territories use their own legislation but follow the same broad higher-of-consideration-and-unencumbered-value approach. Then you test any concession or exemption that applies in your jurisdiction.
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| Jurisdiction | Base dutiable-value rule | Primary source named in the build |
|---|---|---|
| New South Wales | Higher of purchase price and market value | Revenue NSW, how to calculate transfer duty |
| Victoria | Greater of price paid and market value | State Revenue Office Victoria, dutiable value |
| Queensland | Consideration, or unencumbered value where greater | Duties Act 2001 (Qld), section 11(7) |
| Western Australia | Consideration, or unencumbered value where greater | Duties Act 2008 (WA), section 27 |
| South Australia | Greater of consideration and market value | Stamp Duties Act 1923 (SA), section 60A |
| Tasmania | Greater of consideration and unencumbered value | Duties Act 2001 (Tas), section 18 |
| Australian Capital Territory | Consideration or unencumbered value, whichever is greater | Duties Act 1999 (ACT), sections 20 to 22 |
| Northern Territory | Consideration or unencumbered value, whichever is greater | Stamp Duty Act 1978 (NT), section 4AB |
Statutory and revenue-office sources read at the publishers on 18 September 2026, and named per row above. This table describes the base valuation rule before any applicable concession or exemption. Rates, thresholds, evidence and relief differ by jurisdiction, and none of them is shown here. NSW source: Revenue NSW. Victoria's related-party evidence rules are at the State Revenue Office Victoria.
Will the revenue office accept the lender's valuation?
Sometimes, if it meets the revenue office's requirements. Do not assume either yes or no. Victoria expressly allows a valuation commissioned by or for a financial institution for security purposes where the valuer has the required qualifications and the evidence is recent enough. NSW has its own formal-evidence rules and requires an inspection when a formal valuation is needed. Check the state requirements before ordering evidence so one properly scoped valuation can do two jobs where the rules allow it.
Tasmania publishes the sharpest consequence of not having the evidence. Where a transaction was not conducted on the open market, or you cannot provide satisfactory evidence that it was, duty there is generally calculated on the property's capital value multiplied by the land adjustment factor for the relevant municipality, rather than on any figure the parties agreed between themselves. The current Tasmanian ruling is the evidence of value ruling PUB-DT-2023-4, effective 14 September 2023 and confirmed current at build. It is a useful illustration of the general point: the evidence is not a formality, and the fallback is not set by you.
Does the seller pay CGT on the discount?
Not on the discount as a standalone amount. Where the ATO market-value substitution rule applies, the seller generally uses the property's market value as the capital proceeds and then calculates the capital gain or loss in the normal way. The taxable result depends on the seller's cost base and exemptions. If the property qualifies for the main-residence exemption, some or all of the gain may be disregarded. So a $200,000 discount is not automatically a $200,000 taxable capital gain.
Can a family discount affect the seller's pension?
Yes. Services Australia says that giving away, selling or transferring an asset for less than its market value can be gifting. The gifting free areas are $10,000 in one financial year and $30,000 over five financial years, with no more than $10,000 of that five-year amount in a single financial year. Excess gifting can be counted in the assets test and deemed in the income test for five years. A properly structured granny flat interest can change that treatment, which is why section 9 exists.
Are there family-transfer exemptions?
There are targeted concessions and exemptions, not one Australia-wide "family transfer exemption". Spouse or relationship-breakdown rules, family-farm provisions, first-home concessions and corporate reconstruction relief all have their own eligibility tests and differ by state. Do not agree the price because someone has heard "family transfers are exempt". Ask the conveyancer which named concession applies to this exact transfer and test its conditions before signing.
Primary sources, read at the publishers on 18 September 2026: Revenue NSW transfer duty; SRO Victoria related-party evidence; State Revenue Office Tasmania evidence of value ruling PUB-DT-2023-4, effective 14 September 2023 and confirmed current at build; ATO market-value substitution and main-residence guidance; Services Australia gifting free areas.
Can first-home buyer schemes, grants and concessions work on a family purchase?
Potentially, but the family discount does not override the separate eligibility rules. A first-home buyer can have a favourable-purchase loan question, a government-guarantee question, a state duty-concession question and a First Home Owner Grant question at the same time, and each can use a different definition of value or deposit.
Can I use the Australian Government 5% Deposit Scheme when buying from family?
Potentially. The Scheme is accessed through a Participating Lender, and the borrower still has to satisfy that lender's credit policy. For first home buyers, the official rules require a saved minimum deposit of 5 per cent of Property Value. Both the purchase price and the lender-assessed Property Value must be at or below the location price cap, and the home must be bought to live in as an owner-occupier.
Does gifted equity replace the Scheme's 5 per cent saved deposit?
Do not assume it does. The official Scheme material says the buyer must have saved a minimum deposit of 5 per cent of Property Value. A family discount can still improve the transaction's equity position, but it is a different concept from the Scheme's saved-deposit test. Ask the Participating Lender how both rules interact before fixing the contract price.
Can I use Help to Buy when buying a home from family?
Do not assume a discounted related-party purchase is eligible until a Participating Lender confirms it. Help to Buy has a different structure from the 5% Deposit Scheme: you need a participating-lender home loan, at least the minimum deposit, and you are expected to contribute as much as you can reasonably afford before the Government contribution is calculated. The official material allows eligible new and existing homes and says Help to Buy can be combined with state stamp-duty concessions, grants and other exemptions, but not with another government shared-equity scheme, loan or guarantee for the purchase.
The public Help to Buy material does not give a simple Australia-wide yes or no for an established home deliberately sold below market value by a parent. It also uses arm's-length requirements in parts of the scheme, including construction contracts. For that reason, treat a family sale as a policy question to clear with the Participating Lender before signing the contract rather than assuming the family discount and Help to Buy will stack.
Does a family discount preserve first-home duty concessions?
Not necessarily. State concessions have their own conditions. Victoria, for example, currently requires applicants for its first-home buyer duty exemption or concession to be buying the property at market value. That means a first-home buyer can qualify as a first-home buyer yet still fail that particular concession because the family transfer is deliberately below market value. Other jurisdictions differ, so check the state rule rather than importing Victoria's answer nationally.
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| Question | Answer | What to check |
|---|---|---|
| Can a family purchase use the 5% Deposit Scheme? | Potentially | Scheme eligibility plus Participating Lender credit policy. |
| Does the discount replace the Scheme's saved 5%? | Do not assume so | The Scheme requires a saved minimum deposit based on Property Value. |
| Can Help to Buy be used on a discounted family sale? | Confirm before relying on it | Help to Buy has separate lender, deposit, Government contribution and program-combination rules; the public material does not give a blanket rule for every established related-party sale. |
| Which value must fit the Scheme price cap? | Both purchase price and lender-assessed Property Value | Confirm the cap with the Participating Lender for the specific property. |
| Can you rent the property out straight after settlement? | Not while relying on the owner-occupier obligation | Leaving the home can affect the government guarantee and may trigger lender consequences. |
| Are state duty concessions automatic? | No | State-specific value, occupancy and transaction conditions can differ from the federal Scheme. |
Primary sources, read at the publishers on 18 September 2026: Australian Government 5% Deposit Scheme, Scheme FAQs and property price caps; Help to Buy FAQs and Help to Buy Customer Guide; SRO Victoria first-home buyer duty exemption or concession.
What can the family sale cost the parent or seller?
The seller can give up value and still be assessed as though market value mattered elsewhere. The main exposures are CGT, pension or aged-care means testing, creditor risk, the cash needed for the seller's next home, and the family consequences of giving one person a large benefit today.
What if the parent is moving into aged care?
Check this before agreeing the discount. My Aged Care says permanent residential aged-care contributions can depend on a means assessment, and gifted amounts above the relevant gifting free areas can continue to be included as a financial asset. A family discount that looks harmless for the sale can therefore affect both pension and aged-care means testing. If aged care is part of the reason for the transfer, get the means-assessment position modelled before the contract is fixed.
Can the sale be challenged if the seller's business later fails?
Potentially, and the exposure runs for years rather than months. AFSA explains that a bankruptcy trustee may be able to recover property or value from transactions made before bankruptcy. Two provisions do most of the work, and the timing is the part a seller actually wants to know.
- Section 120, undervalued transactions. A transfer is void against the trustee where it took place in the five years before the bankruptcy began and the buyer gave no consideration, or consideration worth less than the market value of the property.
- The related-entity window. A solvency defence becomes available once enough time has passed, but where the buyer is a related entity of the seller that period runs to four years rather than two, and the burden of showing the seller was solvent at the time sits with the buyer.
- Section 121, transfers to defeat creditors. Separate from section 120, aimed at a transfer whose main purpose was to keep property away from creditors, and subject to no time limit at all.
Paying a documented, independently valued market price removes the undervalue feature from section 120, but it does not turn every insolvency question off. If the seller is self-employed, a director or already under financial pressure, use an insolvency-aware solicitor before the transfer rather than after it.
Does the family discount create an estate or sibling problem?
It can. The lender only needs to know the transaction it is funding; the wider family may care whether the discount was intended as an outright gift, an advance on inheritance, compensation for care, or part of a broader succession plan. That is an estate-planning and family-law question, not a credit-policy question. Document the intention while everyone is able to agree on it rather than leaving future executors or siblings to reconstruct it later.
What if the property is already in a deceased estate and I need to buy out a sibling?
That is not just an ordinary favourable purchase with a deceased seller. The finance can involve an inherited share being recognised as equity and a new loan funding the amount needed to satisfy the other beneficiary, but the transfer-duty outcome can depend on exactly how the will, intestacy rules, appropriation or family arrangement operates.
For example, Revenue NSW distinguishes a transfer made in conformity with the will from a buyout that gives one beneficiary more than their entitlement, and can charge ordinary duty on the additional share. Victoria also distinguishes transfers under a will from transfers outside its terms. Because the state estate-transfer rules can materially change the transaction, settle the probate and duty structure with the estate solicitor before the lender treats it as a simple sibling buyout. This is a separate enough problem to deserve its own finance guide rather than being folded into every family-sale rule on this page.
Does the seller need finance for their next home?
Often. A parent can give the child a large discount and then discover that the smaller replacement property still has to be bought at full market value. If the sale and replacement purchase do not line up, the issue becomes a settlement and bridging problem. The bridging loan until your property sells guide covers that timing problem.
Primary sources, read at the publishers on 18 September 2026: ATO family property transfers; Services Australia gifting; My Aged Care means assessments; AFSA treatment of property in bankruptcy, with the statutory windows at sections 120, 120(3) and 121 of the Bankruptcy Act 1966 (Cth), current compilation; Revenue NSW deceased-estate transfers; SRO Victoria deceased estates and duty.
What if your parents sell you the home and keep living there?
Then the occupancy right becomes part of the transaction, not a side promise. A parent who transfers a home and receives a life interest or right to accommodation for life can have a granny flat interest for social-security purposes. The name is misleading: no separate flat has to exist. The lender, ATO, Services Australia and the state revenue office can each care about different parts of the arrangement.
Does the transfer still count as a gift?
Not necessarily. The Social Security Guide says the value of a granny flat interest is generally the amount paid for it, which means there is generally no deprivation amount where a genuine life interest or right to accommodation for life is acquired. Special rules and a reasonableness test can apply where additional assets are transferred or the arrangement is outside the ordinary case.
Is the granny flat arrangement exempt from CGT?
The ATO has a specific exemption for creating, varying or terminating a qualifying granny flat arrangement where the statutory conditions are met, including a written and binding arrangement and a non-commercial character. That exemption is about the granny flat arrangement itself. It does not automatically exempt a separate CGT event on the transfer of the underlying property, which still needs to be tested under the ordinary CGT rules.
What should the right-to-live-there agreement cover?
At a minimum, get legal advice on the lifetime right itself, who pays rates, insurance and upkeep, what happens if the child wants to sell or refinance, what happens if the child separates from a partner, how the parent is protected if the relationship breaks down, what happens if the parent moves permanently into aged care, and whether any compensation or exit mechanism applies. The Social Security Guide specifically recognises that leaving within five years can be reviewed and that unforeseen illness, family relationship breakdown, elder abuse or property damage can change the deprivation outcome.
The wording also decides the duty outcome, which is a further reason not to work from a template. Victoria's public ruling DA-028 draws the line between the two things people use interchangeably. A right to reside must be occupied to be held, is extinguished when the property is given up, and cannot be transferred or assigned, so it is not an interest in dutiable property. A life tenancy or life interest can be treated as the holder's own until death, does not require them to live there, and is transferable, so it is an interest and a transfer of it is a dutiable transaction. That ruling is framed around interests arising under a will rather than an arrangement between living family members, and duty is state law, so do not read it across into your own jurisdiction without advice. What it does establish is that two documents people describe in the same breath are not the same thing.
Will a lender fund a property the seller still lives in?
Possibly, but disclose it before the contract and loan are finalised. A registered life interest, caveat or other enforceable occupancy right can affect the lender's security and its ability to sell the property if the loan defaults. The lender needs to understand exactly what right survives a refinance, sale or enforcement event. A handshake promise that "Mum can stay forever" is the worst version because it leaves everyone unsure what the promise legally means.
Primary sources, read at the publishers on 18 September 2026: Social Security Guide 4.6.4.50, 4.6.4.70 and 4.1.6; ATO granny flat arrangements and CGT; State Revenue Office Victoria public ruling DA-028, duty liability of a right to reside, life tenancy or life interest, status current, updated 9 December 2025, which is Victorian only.
Can you refinance or release the family equity after settlement?
Potentially, but the original discount is not a standing cash facility. A later refinance, top-up or equity release is a new application based on the property's current accepted value, the remaining debt, your serviceability, the loan purpose and the lender's policy at that time.
How soon can you refinance a favourable purchase?
There is no useful Australia-wide waiting period to quote. A lender may have its own rules about how recently the property was purchased, which valuation it will accept and what evidence it wants for the new purpose. If your plan depends on releasing equity shortly after settlement, disclose that plan before the original purchase so the first structure is not built on an exit assumption the next lender will reject.
Can you take cash out of the gifted equity later?
Potentially. Helia's current guidelines treat equity release as a separate loan purpose and calculate the LVR using the valuation amount. The lender still needs to approve the amount and purpose, and your serviceability still matters. This is different from borrowing more than the contract price on settlement day.
Can you rent the property out after using the 5% Deposit Scheme?
The Scheme has ongoing owner-occupier obligations. Its official website warns that if those obligations are not met, the government guarantee may no longer apply and the lender may require LMI or other costs. If your plan is to live there briefly and then turn the home into an investment, tell the Participating Lender before relying on the Scheme.
What is my CGT cost base if I buy from family below market value?
Do not assume the discounted contract price is automatically the buyer's CGT cost base. The ATO's market-value substitution rules can substitute market value into the cost base where an asset is acquired in a non-arm's-length transaction for less than market value. The actual later CGT calculation still depends on the facts, acquisition costs, improvements and any exemption, so keep the independent valuation and settlement records from the original family transfer.
What if my parents keep living there before I move in?
Do not assume the buyer gets the full main-residence exemption from settlement just because the property is a family home. The ATO's general rule is that a dwelling qualifies from acquisition where the owner moves in as soon as practicable; a mere intention to occupy later is not enough. If the parents keep occupying the home and the buyer does not move in, get tax advice on the period before it becomes the buyer's actual main residence, especially if an occupancy right, rent or later investment use is involved.
What records should I keep after a related-party purchase?
Keep the contract or transfer, the independent market valuation, lender valuation if different, settlement statement, duty assessment, legal and registration costs, evidence of any gift or family loan, major improvement invoices, and records showing when you moved in, moved out or first rented the property. Those documents can matter years later when an accountant works out cost base, a revenue office checks the original transfer, or a lender asks why the original purchase price was below the current value.
Can you use the equity for a business or another property?
Possibly, but that changes the loan purpose and can change the lending and tax analysis. A business owner may be able to refinance or release equity for a genuine business purpose, but the structure, security, serviceability and tax deductibility need to be assessed separately. The property portfolio restructuring guide is the closer next step if the family purchase becomes part of a wider property or business structure.
Primary sources, read at the publishers on 18 September 2026: Helia current guidelines, section 4.2.8 on equity release; Australian Government 5% Deposit Scheme ongoing obligations; ATO main residence guidance; ATO property record keeping.
What order should you do a related-party property purchase in?
Work out the family objective and market value first, then test the seller consequences and lender policy before anyone locks in the price. The clean sequence separates what the family wants from what the lender, tax system and state revenue office will accept.
Should a family-sale contract be subject to finance and valuation?
Get the conveyancer or solicitor to decide this before the contract is signed. A subject-to-finance clause can give a purchaser a right to end the contract if the required finance is not approved, but the wording, deadlines and notice requirements matter. It should not be treated as a generic escape clause. A separate valuation condition can also matter where the family price or gifted-equity structure depends on the bank accepting a particular market value.
NAB's published buyer guidance specifically tells purchasers to consider both finance and valuation conditions, and Victorian legal-practitioner guidance warns that a pre-approval can still be conditional on valuation and that missing the finance-clause deadlines can leave a purchaser bound. The exact clause is state and contract specific, so this belongs with the buyer's property lawyer rather than a copied template.
- Agree the objective, not the final number. Decide who should own the property, whether the parents are leaving or staying, and whether the discount is intended as a gift, succession step or something repayable.
- Get the seller's payout and next-step numbers. Obtain the current mortgage payout and work out whether the seller needs the proceeds for another home, aged care or other debt.
- Check seller-side tax, pension, aged-care and creditor issues. Use the accountant, solicitor and Services Australia or a licensed adviser where those issues apply. Do this before the family price becomes emotionally fixed.
- Check first-home support before relying on it. If the buyer is a first-home buyer, test the 5% Deposit Scheme, state duty concessions and any grant separately. A below-market sale can help one test and hurt another.
- Establish a defensible market value. Before ordering reports, ask the conveyancer and broker what evidence the revenue office and lender each require. In some states one properly qualified valuation can satisfy both; in others the evidence path can differ.
- Tell the broker or lender exactly who is related and how the price was set. Confirm whether the lender has a favourable-purchase policy for this borrower, property and relationship, and test serviceability as well as LVR.
- Only then have the contract or transfer documents finalised. The solicitor or conveyancer should document the actual arrangement, including any gift, continuing occupancy right or family loan.
- Lodge the finance application with a consistent evidence pack. The lender's valuation, source-of-funds evidence, family declarations and contract should all tell the same story.
- Calculate the real cash to complete. Include duty, legal and registration costs, adjustments, any lender costs, the seller's payout, and any cash contribution required by lender or scheme policy.
- Do normal property due diligence. The family relationship does not replace building, pest, title, insurance or contract checks where they are relevant.
- Settle and diarise the after-settlement obligations. That can include owner-occupier obligations under the 5% Deposit Scheme, pension or aged-care reporting, CGT records, the terms of any lifetime occupancy agreement and any later refinance plan.
Contract sources: NAB, finance and valuation conditions; Legal Practitioners' Liability Committee, subject to finance requires strict compliance.
The family price should be an output, not the starting assumption. First establish value, policy fit, seller consequences and cash to complete. Then write the contract around the transaction that actually works.
Key takeaway: gifted equity can solve an LVR problem. It does not solve serviceability, duty, seller consequences or bad sequencing.Frequently asked questions about buying property from family
Yes. A parent can sell a property to a child below market value, but the family price does not become the only number that matters. A lender may treat the difference between the accepted valuation and the contract price as equity under its favourable-purchase policy, while transfer duty is generally worked out on the higher of price and market value and the ATO may apply market-value substitution for CGT. The seller's pension, aged-care and creditor position can also matter, so establish the market value and advice position before fixing the family price.
It depends on the lender and the policy being used. APRA permits non-arm's-length purchases to sit outside the ordinary rule that caps the LVR value at the purchase price. Under Helia's current favourable-purchase LMI standard, the LVR is based on the valuation while the insured loan cannot exceed the contract price. That is not a promise that every lender will use the same treatment, so confirm the policy before you rely on the discount.
It can create equity for LVR purposes where the lender recognises a favourable purchase, but that is not the same thing as satisfying every cash-deposit or savings rule. You may still need your own funds for transfer duty, legal costs, settlement adjustments and any lender or scheme requirement. A family discount can solve an equity problem without solving a cash-at-settlement or serviceability problem.
No. Gifted equity is the value a parent permanently gives up by selling below the lender-accepted market value. A family guarantee is a separate credit structure where another person guarantees part of the debt or offers additional security. A favourable purchase may avoid the need for a family guarantee if the accepted equity is sufficient, but they are not interchangeable terms.
Possibly. Buying from family does not automatically remove LMI. Whether LMI is required depends on the lender, the resulting LVR, the loan product and whether another structure such as the Australian Government 5% Deposit Scheme applies. A large family discount can reduce the LVR, but it is the accepted numbers and policy that decide the outcome.
There is no single Australia-wide answer. Helia's current public standard uses the term deposit funds rather than a universal genuine-savings rule and, for a standard product above 90% base LVR, requires 5% deposit funds from an acceptable source held in the borrower's name at application. Individual lenders can impose their own contribution or savings tests, so do not assume the discount alone satisfies them.
Potentially, if you meet the Scheme rules and a Participating Lender accepts the related-party transaction under its credit policy. For first home buyers, the Scheme requires a saved minimum deposit of 5% of Property Value, and both the purchase price and the lender-assessed Property Value must fit the applicable price cap. The family discount does not by itself replace the Scheme's saved-deposit requirement.
Not under the Helia favourable-purchase treatment described in this guide. Its current standard says the insured loan amount must not exceed 100% of the purchase or contract price. The equity can reduce the LVR, but it is not cash released to you at settlement. Any later equity release is a separate application based on the then-current value, serviceability, purpose and lender policy.
Potentially, but not as an automatic extension of the original purchase. A refinance, top-up or equity-release request is a new credit decision using the lender's current valuation, your serviceability, the proposed loan purpose and its policy at that time. Helia also treats equity release as a separate loan purpose. There is no general right to cash out the original family discount immediately after settlement.
It can be possible. The ATO gives a published example of a parent selling to a child for the mortgage balance, but uses the property's market value to calculate the parent's CGT position because the sale was below market value and not at arm's length. The seller's existing mortgage still has to be discharged at settlement, so confirm the payout figure and make sure the settlement proceeds are enough to clear it or that the seller has a plan for any shortfall.
A token-price transfer does not make the property's market value disappear. Finance, duty, tax and social-security rules can still require a real market value, and the seller's mortgage must still be discharged if one exists. If the intention is effectively to gift the property, tell the solicitor, accountant and lender exactly that rather than trying to make the transaction look like an ordinary $1 sale.
Sometimes a family wants to combine a discounted sale with a loan from the seller. Do not assume that structure is compatible with a standard favourable-purchase home loan. Helia's current LMI standard lists vendor finance as an unacceptable loan purpose for its LMI, and other lenders have their own rules. If money is expected to be repaid, it also should not be described to the lender as an unconditional gift.
Usually the family discount does not reduce the dutiable value. Revenue NSW, for example, calculates transfer duty on the higher of the purchase price and market value, and related-party transactions commonly require formal evidence of value. Other states and territories use the same broad higher-of-value principle, but concessions, exemptions and evidence rules differ, so the actual duty is a state-specific legal question.
A family discount can trigger the ATO's market-value substitution rule, but that does not automatically mean the seller has CGT to pay. Where the rule applies, the seller generally uses market value as the capital proceeds, then calculates any capital gain using the normal cost-base rules and any available exemption. If the property qualifies for the main-residence exemption, some or all of the gain may be disregarded.
The common failure points are policy fit, serviceability, a valuation below the family's assumed value, insufficient cash for duty and costs, unclear gift or source-of-funds evidence, a seller mortgage payout that does not work, and late disclosure of the relationship or an ongoing occupancy right. The family discount can fix the deposit equation and still leave any of those other issues untouched.
It can be investigated and, in some circumstances, unwound, and the window runs for years. AFSA explains that a bankruptcy trustee may be able to recover property or value from an undervalued transaction under section 120 of the Bankruptcy Act, which reaches a transfer made in the five years before the bankruptcy began where the buyer gave less than market value. Where the buyer is a related entity of the seller, the period in which the solvency defence is not available runs to four years rather than two. Section 121 separately deals with a transfer whose main purpose was to keep property away from creditors and carries no time limit at all. If the seller is a business owner or director under financial pressure, this belongs with an insolvency-aware solicitor before the transfer.
Separate advice is often sensible because the interests are different: the buyer carries the loan and transfer-duty issues, while the seller may carry CGT, pension, aged-care, estate and insolvency consequences. Whether one practitioner can act for both parties depends on professional-conduct and conflict rules in the relevant jurisdiction. Ask the solicitor or conveyancer directly before engaging them.
Yes, but the occupancy arrangement needs to be designed before the transfer. A lifetime right to accommodation can be a granny flat interest for social-security purposes, and the ATO has a specific CGT exemption for creating, varying or terminating a qualifying written, binding, non-commercial granny flat arrangement. That does not automatically exempt the property transfer itself, and the lender must also be comfortable with any right that affects its security.
Do not assume it will be. A favourable-purchase lender or insurer can require a qualified valuation that records the price and nature of the transaction, while the revenue office has its own evidence rules. The same report may sometimes satisfy both: Victoria, for example, can accept a qualifying valuation commissioned for a financial institution. Check both sets of requirements before ordering evidence so you do not pay twice.
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