Often a Contract for Sale will not be entered when the property is transferred between family members. Such transactions include when property or a portion of a property is gifted, sold (often for less than market value), or when one person is removed from the title of a property that was originally purchased together. Instead, a Memorandum of Transfer will be entered into.
It is a common misconception that no transfer duty (formerly known as stamp duty) is payable on family transfers, however this is not the case. Revenue NSW requires transfer duty to be paid by anyone buying or acquiring property. Therefore, family transfers are still subject to transfer duty even if no Contract for Sale is entered or there is no purchase price. If only a portion of the property is being transferred, then transfer duty will be payable on that portion only.
Revenue NSW calculates transfer duty on the dutiable value of the property. The dutiable value is the higher of the purchase price (consideration) and the market value of the property. Revenue NSW requires an independent valuation to be carried out for a property being transferred between people that are related to determine the property’s market value. This means that an independent valuation will be required for family transfers. In family transfers the market value will often be higher than the purchase price and accordingly transfer duty would be payable on this amount.
It is important to take transfer duty into consideration when planning a family transfer to ensure that the family member buying or acquiring the property has sufficient funds to pay the transfer duty before settlement when the Memorandum of Transfer is lodged with Land Registry Services. If a property is being gifted or sold for less than market value, the family member receiving the property may not have saved for the same and this may mean that finance may need to be sought for payment of the transfer duty.
There are some concessions and exemptions from transfer duty when the property is being transferred between family members. These include:
Break-up of marriage or domestic relationships
Court Orders or a Financial Agreement made under the Family Law Act 1975 are required to receive an exemption from transfer duty for matrimonial property which is being transferred due to the dissolution, annulment or breakdown of a marriage. For a domestic relationship, a Court Order or a Termination Agreement made under the Property (Relationships) Act 1984 is required for relationship property.
Nominal transfer duty in the sum of $50.00 only is payable where the property is transferred from a deceased family member to a beneficiary in accordance with the deceased’s Will or the rules of intestacy.
Transfers between married couples and de facto partners
An exemption from transfer duty is available when the principal place of residence is transferred to add a spouse or de facto partner so that the couple will own the property equally (either as joint tenants or tenants in common in equal shares).
Please note that other eligibility requirements may apply to the above concessions and exemptions.
Should you wish to discuss a family transfer further or determine whether you are eligible for a concession or exemption from transfer duty, please don’t hesitate to Contact Coutts today.
This blog is merely general and non specific information on the subject matter and is not and should not be considered or relied on as legal advice. Coutts is not responsible for any cost, expense, loss or liability whatsoever in relation to this blog, including all or any reliance on this blog or use or application of this blog by you.