Transfer property without paying stamp duty

Do I have to pay Stamp Duty?

Where there is no stamp duty exemption or concession met under the Duties Act 1997 (NSW) and as noted above, you will be required to pay stamp duty and the vendor may need to pay capital gains tax. In NSW, stamp duty is based on the property’s contract price (or sales price) or the market value of the property, whichever is higher; and not the contract price. If the buyer and seller are related or associated, or you’re not transferring the whole property, the property you must obtain an independent valuation by a suitably qualified property valuer. They will look into a number of factors such as the property’s market, recent sales, originally purchased price, zoning, restrictions on the property, and renovations or any property upgrades to determine the valuation price for nominal transfer duty. Transfer duty will then be payable on the new portion of the property title now attributed to you. As part of the property transfer, our solicitors will lodge an application for assessment on the contract for sale or transfer of land on your behalf, and arrange for paying transfer duty as part of the property title settlement process.

Gifting Property or Selling property

Whilst you may be generous gifting property or selling property at below market value to a family member or significant relationship, the tax man isn’t so gifting. Whether it is an investment property or the family home, transfer ownership will attract stamp duty if it does not fall in the stamp duty exemption categories:

1. For relationship breakdowns there would need to be a certified domestic partnership agreement, binding financial agreement or court order;

2. Deceased estate where the beneficiary is specified on the will and/or under the general rules of intestacy stamp duty exemptions may apply.

3. Transferring family home within a marriage significant relationship or de facto partners.

4. Foreign transferees who would need to pay the surcharge purchase duty currently set to 8% on the property’s independent valuation or market value.

What is a related party?

Related parties can be defined as spouses, family members or people in a business or personal relationship. Such transactions are not considered “arms length”, and the parties have a pre-existing relationship and often benefit from the nature of the transaction differently to an “arms length” transaction, such as receiving a property at a below market value price or gift. Related party transfers include adding a spouse on title, change of ownership between related parties for refinancing, court orders and/or property settlements such as divorce or de facto partners separations, transfers between family members as a gift or below market value, transfer to deceased estates to the beneficiary, and transfers between a trust or company to a person for tax purposes.

Property transfer to family members or related parties

Generally speaking, transferring property between family members or related parties attracts transfer duty, however some property transfers may qualify for a stamp duty exemption or concession. If you paid transfer duty, but realise you were entitled to an exemption or concession you can actually lodge a claim for a refund within 5 years.

There are 3 main questions you need to ask before transferring property between family members or related parties:

1. Will the property transfer be by gift, sale, or holding change?

2. Understand the costs involved including: What are the Title Office costs and stamp duty fees involved?

3. Are there any capital gains tax implications for the vendor?