Updated 10 October 2026
Gifting a property to your child, or selling it to them for less than it is worth, does not reduce the capital gains tax. The ATO taxes you as if you sold it at market value on the transfer date, and your child's cost base becomes that same market value. The only number the law cares about is what the property was worth on the day, which makes the valuation the centre of the whole exercise.
At a glance
- A parent who gifts or under-sells a property is taxed on market value at the transfer date, not on the price
- The child's cost base is that same market value, so the family is not taxed twice on the parent's gain
- If the property was the parent's main residence throughout, the gift is exempt; the child still takes a market value cost base
- The valuation date is the day the transfer contract or document is signed
- Stamp duty is assessed on market value in every state, with its own evidence rules
In this guide
- Why the price you agree does not matter
- The parent's side: proceeds at market value
- The child's side: a market value cost base
- Worked example: gift versus sale at $500,000
- When the property was the parent's home
- The valuation date and the evidence
- Stamp duty runs on the same value
- Gifting before or after 1 July 2027
- Common questions
Why the price you agree does not matter
Parents transfer property to children for good reasons: to help with a first home, to settle an estate early, to move an investment to the person who will manage it. The instinct is to set a family price, or no price at all, and assume the tax follows the money. It does not.
The market value substitution rule replaces the actual price with market value whenever a property changes hands for nothing, or between people who are not dealing at arm's length. A parent and child are the textbook case. The rule works on both sides of the transaction at once, and this guide takes each side in turn without re-explaining the rule itself; the linked post does that.
The parent's side: proceeds at market value
Under section 116-30 of the Income Tax Assessment Act 1997, a parent who receives nothing for the property is taken to have received its market value at the time of the CGT event. A parent who receives something, but less than market value from a child they are not dealing with at arm's length, is treated the same way.
The gain is then worked out exactly as if the property had been sold to a stranger: market value less the parent's cost base, with the 50 per cent discount where the property was held for more than 12 months and the event happens before 1 July 2027. The tax is payable in the parent's return for the year of the transfer, with no cash from the sale to pay it. That is the point most families have not planned for.
The child's side: a market value cost base
The same rule, in section 112-20, sets the child's cost base. Because the child did not pay for the property, or did not deal at arm's length, the first element of their cost base is the market value on the day they acquired it. Whatever token price was on the transfer is ignored.
That is the fair half of the rule. The parent has been taxed up to the market value, so the child starts from it. When the child eventually sells, their gain is only the growth after the transfer. Without a valuation on file, the child has no evidence of that starting point, and years later the ATO's default is to ask for it.
Worked example: gift versus sale at $500,000
Note
Worked exampleA parent bought an investment unit in 2012. The cost base, including purchase costs, is $435,000. In 2026 the parent transfers it to their daughter. A valuation dated to the transfer date puts the market value at $700,000.
If it is a gift: the parent's proceeds are $700,000. Gain $265,000, held more than 12 months, so $132,500 is added to the parent's taxable income. The daughter's cost base is $700,000.
If the daughter pays $500,000: the parent's proceeds are still $700,000, the gain is still $265,000, and the daughter's cost base is still $700,000. The $500,000 changes who holds the cash, and nothing about the tax.
When the daughter sells for $820,000: her gain is $120,000, measured from $700,000. Had her cost base been the $500,000 she paid, the gain would have been $320,000, which is the parent's gain taxed a second time. The substitution rule prevents that, but only if the $700,000 is documented.
Figures are illustrative and exclude the daughter's own purchase and sale costs. A property held by the daughter across 1 July 2027 would have its gain split at that date; the CGT calculator shows the mechanics.
Transferring property to a family member?
One independent valuation report dated to the transfer day, prepared by a Certified Property Valuer and supported by documented comparable sales evidence, serves the CGT position for both parent and child. Residential $297 and commercial $595, AUD inc. GST, delivered in 24 to 48 hours.
Start your orderHow it worksWhen the property was the parent's home
If the property was the parent's main residence for the whole period of ownership and was not used to produce income, the parent's gain on gifting it is disregarded under the main residence exemption. The transfer still happens at market value; the exemption just means the deemed gain is exempt.
The child's position does not change. Their cost base is market value on the transfer date, and the property is not their main residence unless they move in. A child who takes over a parent's home and rents it out is holding an investment property from day one, with a cost base that needs a valuation to prove.
Partial exemptions follow the usual rules. A home the parent rented out for some years, or used for a home business, gives a partial gain that is calculated on the market value proceeds. Our guide to the main residence exemption covers how the partial calculation works.
The valuation date and the evidence
The market value is fixed at the time of the CGT event. For a transfer under a contract that is the day the contract is entered into; for a transfer by deed or transfer form without a contract, it is the day the document is signed. It is not the day the title office registers the change. Our guide to which date is the CGT valuation date covers the timing rules for every event.
The evidence has to meet the ATO's standard for market valuations: independent, prepared by a qualified valuer, using comparable sales evidence around the valuation date, with the method and reasoning set out. A real estate agent's appraisal does not meet it, and a figure the family agreed between themselves is exactly what the substitution rule was written to override.
The same report serves both sides. The parent files it with the return that reports the gain; the child keeps it as the cost base record for a sale that may be twenty years away. Where the transfer happened years ago and no valuation was done, a retrospective valuation at the transfer date can reconstruct it from sales evidence of the time.
Note
From our valuation filesA widow transferred a Victorian holiday house to her two adult sons for nil consideration in 2025. She had bought it in 1996 and the family assumed the transfer was a non-event because no money moved. Both sides needed a market value: hers to work out the gain on a deemed disposal, theirs to set the cost base they will be taxed on later. Our valuation supported $840,000 at the date of transfer, and the sons now hold documented evidence rather than an estimate.
Details are changed. This is a composite of typical files rather than one client.
Stamp duty runs on the same value
Every state and territory revenue office assesses transfer duty on a family transfer at market value, not at the price, and each has its own rules about what evidence of value it will accept and when a formal valuation is required. One valuation dated to the transfer day usually serves the duty assessment and the CGT calculation together, provided it states both purposes. The detail is state-specific, so it lives on our city pages: Adelaide, Sydney, Melbourne, Brisbane, Perth, Canberra, Hobart and Darwin.
Gifting before or after 1 July 2027
From 1 July 2027 every affected property is treated as sold and reacquired at market value, and the gain after that date falls under the capital gains tax changes: no 50 per cent discount for individuals, CPI indexation of the cost base, and a 30 per cent minimum tax. Gains accrued before the reset keep the old treatment.
For a gift that raises two questions. A parent who transfers before 30 June 2027 has the whole gain taxed under the current rules, with the discount. A parent who transfers after 1 July 2027 has the gain split at the reset date, with the post-reset slice taxed under the new rules. Either way the child's cost base is the market value on the transfer date, and if the child then holds across 1 July 2027, the reset applies to them too.
None of that is a reason to rush. The reset preserves the pre-2027 gain whenever the parent transfers. It is a reason to have the transfer-date value evidenced properly, because from 2027 it becomes one of two market values on the same property that the ATO can ask for.
Common questions
Do I pay capital gains tax if I gift a property to my child?
Yes, unless the property was your main residence for the whole time you owned it. The ATO treats you as having sold it for its market value on the day of the transfer, and you pay CGT on the gain from your cost base to that value, even though no money changed hands.
What is my child's cost base for a gifted property?
The market value on the day they acquired it. Because they paid nothing, or did not deal with you at arm's length, the first element of their cost base is substituted with market value. When they sell, their gain is measured from that figure, not from what you paid years earlier or from any token price.
Is it better to sell to my child at a low price than to gift it?
For CGT it makes no difference. A sale at $500,000 to a child, where the property is worth $700,000, is treated exactly as a gift: your proceeds are $700,000 and their cost base is $700,000. The price only matters for the cash that moves between you.
What date is the valuation for a gift to a family member?
The date of the CGT event, which is the day the contract or transfer document is signed, not the day the title changes. That is the date the market value is substituted for both you and your child, and the date a valuation report should carry.
Does stamp duty also apply when I transfer property to my child?
In every state and territory, and it is assessed on market value rather than the price, so the revenue office will want evidence of that value too. The rules and the evidence each office accepts differ by state; our city pages set them out.
Can I use the 1 July 2027 reset to avoid CGT on a gift?
No. The reset fixes a market value cost base at that date for property you still hold; it does not cancel a gain you crystallise by transferring before or after it. A gift made after 1 July 2027 is taxed on the pre-reset slice under the old rules and the post-reset slice under the new ones.
