Transferring Property Between Family Members

KEY TAKE-OUTS

• Three ways to transfer property between family members
• Stamp Duty Will Be Applicable Unless There Is An Exception. There May Also Be Capital Gains Tax Implications That You Should Be Aware Of.
• What Does The Process Of Transferring Property Between Family Members Looks Like?
• The Implications Of Transfer On Pension Receivers.

With today’s tough property market and for many other reasons, it is becoming increasingly popular for families to want to transfer their property or a share of the property to another family member. However, many people are not aware of the stamp duty and tax implications of transfer of property to family.

Types and method of property transfer to family

There are three ways to transfer property to family members

• Gifting;
• Selling; and
• Transfer between Couples.

Each kind of transfer has a different method that must be followed.

Gifting property to a children or family member

Although no money or contract are exchanged when gifting a property to a family member, the process is still considered a legal process and thus the transfer must be registered and supported by a government-issued document. In this instance a market valuation done by an independent valuer of the property must be obtained. Whilst you and your family member can agree that no money will change hand stamp duty will be paid on the market valuation got the property. This is done through the PEXA platform and stamp duty will be assessed by Revenue NSW.

Selling a house to a family member

If you are wanting to sell your property to a family member, the method is like an ordinary purchase. It is safest to have a contract of sale drawn up for both parties’ protection. You can form an agreement to sell the property for any price agreed and in many cases for a value that is much less than what the property is worth. In this instance again a market valuation done by an independent valuer of the property must be obtained. However, where parties are related stamp duty will be assessed on the greater of the amount paid or the value by the independent valuer.

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Transferring property between spouses

In regard to the transfer of a proportion of ownership there are different exemptions that apply for stamp duty. de facto and married partners are not required to pay tax on the transfer. Under section 104B of the Duties Act 1997 no duty is chargeable on the transfer of residential land if as a result of the transfer the property will be held by a married or de facto couple as tenants in common in equal shares or joint tenants and will be their primary place of residence. De facto partners must have been living together for at least two years to qualify for this exemption.

Under section 68 of the Duties Act, the transfer of matrimonial or relationship property is exempt from stamp duty. the exemption will only be granted if the transfer or agreement is affected in accordance with the requirements of the section.

These exemptions will only be the case if all requirements are met under the Act. This is something a Solicitor or Conveyancer would be able to help you determine.

Capital Gains Tax implications

In regard to Capital Gains Tax Implications, it is important before considering property transfer between family members that you speak to an accountant to get advice as to the financial implications of such a decision.

Verification of Identity and Consent

In transferring property between family members, it is possible to both be represented by the same firm however this removes the ability to remain impartial. As such both parties should receive independent legal advice. You will still be required to complete the same documents as in a standard purchase or sale of a property such as a purchaser/transferee document and a client authorisation. All parties will also need to have their identity verified for the purposes of the transaction.

Implications: Transferring property to a family member receiving a pension 

If you or the person receiving the property receive a pension, it is important to consider the implications of the transfer on that pension. Centrelink has strict rules relating to people disposing of assets in the form of a gift to family members to influence their eligibility for a pension.  It is important to consider these implications before going through with the transfer.

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Conclusion 

While transferring property to family members has many benefits, it is important that you speak to a solicitor or conveyancer to ensure that all parties are aware of the implications and the necessary requirements to do so.