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Transfer of property ownership between related parties

Transferring ownership of property between related parties can be more cost effective and efficient method of transferring property. However, it is important that any transfer of property is dealt with properly to ensure that issues do not occur later.

For more information on the transfer of property ownership to a related party, please contact us on 02 8539 7475.

Who is a related party?

A related party for the purpose of the transfer of property ownership can include spouses, family members or people in a business or personal relationship.

  • A property settlement as a result of a divorce or de factor separation.
  • A deceased estate when a beneficiary is transferred a property.
  • A transfer between spouses when one spouse is added to the title.
  • A transfer as a gift or below market value between family members.
  • A transfer between a personal name from a company or trust for taxation purposes.

What are the benefits of your transfer of property ownership to a related party?

There are various benefits associated with the transfer of property ownership to a related party.

Due to the nature of the relationship between the parties of the transfer, which is seen as not being an arms length transaction, there may be benefits relating to the transfer duty and the costs associated with the transfer.

For more information on the potential benefits of the transfer of property ownership to a related party, you can contact us on 02 8539 7475.

Stamp duty and the transfer of property ownership between related parties

Stamp duty is generally required for related party transfers of property, regardless if the property is being acquired as a gift. There are certain exemptions and concessions which may apply regarding the payable stamp duty.

If the property is being transferred as a gift or below the market value, it is required that a valuation report from a registered property valuer is obtained. The stamp duty payable is based upon the market value of the property stated by this report and the share of the property which is obtained.

Exemptions and concessions to transfer duty:

Transfer between married couples and de factor partners

There is no transfer duty payable in the instance of a transfer of a residential land between a married couple or a de factor partners and the transferred property is either the family home (principal place of residence) or vacant land which is intended to be used as the site of a family home.

Foreign transferees

If a person eligible for the exemption of transfer duty is a foreign person, they are still compelled to pay a surcharge purchaser duty of 8% of the value of the property which they are receiving

A foreign person is generally a person or company who is not ordinarily a resident in Australia and is not an Australian citizen

Family home used for other purposes

If the family home which is available for the exemption to transfer duty is also used for other purposes, only the part of the house which is used for residence will apply.

If the use related to a business or undertaking which is primarily conducted elsewhere and uses no more than one room for the non-residential purpose, the full exemption is still available

Marriage, de facto or domestic relationships break-ups

After a break up of a marriage, de factor or domestic relationship you may be exempt from paying transfer duty on the matrimonial or relationship property. The property must be transferred to either of the partners in the relationship, the child or children of either partner or a trustee for the child or children of either partner to be eligible of the exemption. If a foreign transferee is eligible for this exemption, they will not be required to pay the 8% surcharge purchase duty upon the property.

A domestic relationship is where two adults live together with each other to provide care and domestic support but are not married.

Matrimonial property is property which is owned by the parties to a marriage or property which is owned by either of them.

What should be considered when transferring property ownership to a related party?

Costs

While certain circumstance may allow certain costs to be mitigated, such as the lack of need for a Contract for Sale, the costs of any lawyer’s fees, lodgement fees, title registration and bank fees should be considered before proceeding with the transfer of property ownership to a related party

Tax

Capital gains tax, GST and other tax implications may arise due to the transfer of property to a related party.

Mortgage

If property is transferred to a related party, any existing mortgage on the title will need to be amended. This will generally require that the mortgagee is notified of the potential transaction and a discharge of mortgage and/or a refinance.

For more information on the transfer of property ownership to a related party, you can contact us on 02 8539 7475.

Why BSM Lawyers

Brander Smith McKnight’s expert conveyancing lawyers are experienced property and conveyancing lawyers.

Our team of conveyancing lawyers can assist you in all legal matters relating to the transfer of property ownership to a related party.

Most importantly, our conveyancing lawyers understand the anxiety and stress that property matters can bring about in out clients. Our conveyancing lawyers work diligently to alleviate this stress and anxiety by keeping you well informed throughout your property matter and explaining legal concepts and processes to you in clear and simple English.

For more information on Brander Smith McKnight’s legal services in any areas of conveyancing, you can contact us on 02 8539 7475.

Brander Smith McKnight has offices conveniently located in Sutherland, Parramatta, Wollongong and Sydney CBD.

FAQs

chevronShould I have a lawyer draft my transfer of property ownership to a related party?

You may want to consider having a lawyer draft your transfer of property ownership to a related party.

This is because a lawyer can ensure the transfer is drafted correctly and unambiguously in order to avoid complications between the transfer’s parties.

A lawyer can also follow your instructions and consider your circumstances when drafting a your transfer of property ownership to a related party in order to create an agreement that is sufficiently tailored to your situation.

For more information on how Brander Smith McKnight’s expert property lawyers can assist you with transferring property between related parties, please contact us on 02 8539 7475.

chevronShould I have a lawyer review my transfer of property between related parties?

You may want to consider having a lawyer review your transfer of property ownership between related parties. A lawyer can assist you in understanding the rights and obligations that arise because of the agreement. In addition, a lawyer can help you ensure that the agreement is effective and enforceable.

chevronIn a related party transfer of property is a Contract for sale required?

While a Contract for Sale is generally required for the transfer of a property, in certain circumstances, such as when the ownership of the property is to be transferred due to a court order, a Transfer document may be sufficient. Money and time can be saved for all parties involved if the transfer of the property can be completed without the need of a Contract for Sale.

For more information on how Brander Smith McKnight can assist you in transferring property between related parties, please contact us on 02 8539 7475.

chevronWhat is a property title?

When a property is bought or sold, the change of the ownership needs to be recorded by the government, this being known as the property title. Each state and territory is relied upon to maintain their own registry of these titles.

chevronAre you able to gift a house to another person in New South Wales?

You are able to gift a house to a family member, friend or another person. Stamp duty would generally still be payable on the market value of the property, not the value which the property was transferred for.

chevronWhen is market value used to calculate the capital goods tax?

The market value of the property is used to calculate the capital goods tax related to the property when the property was received for an amount greater or less than the market value of the property and that the parties were not dealing with each other at ‘arm’s length’.

chevronWhat is dealing at ‘arm’s length’?

Deal at ‘arm’s length’ is when each party acts independently and neither party exercises influence or control over the other in connection with the transaction. The relationship between the parties is viewed and the quality of the bargaining between them.

chevronAre there exceptions to the Market Value Substitution rule?

There are two main exceptions to the market value substitution rule, that is if the property is transfers to a former spouse on the breakdown of your marriage or relationship or that the trustee who would be receiving the property of a special disability trust for no payment, making capital gain or capital loss to be disregarded.

chevronWhat are the benefits of transferring property to family members?

Some of the main benefits in transferring property to family members include:
Helping a family member get a foothold in the property market
Ensure that a family member received their future inheritance early

Certain tax considerations – Protection of assets

chevronDoes the main residence exemption from capital gains tax apply in the transfer of property between related persons?

Yes, so long as you are eligible for the main residence exemption from capital gains tax the transfer between related persons will not affect the eligibility to this right.

chevronDo you have to pay fees when you gift a property to a family member?

Yes, there is still paperwork processing fees, legal fees and valuation costs as well as stamp duty and capital gains tax tied to the property unless there are exemptions available.

For more information on how Brander Smith McKnight can assist you in transferring property between related parties, please contact us on 02 8539 7475.

chevronHow much does a registered property valuer cost to for a valuation report?

An independent valuation from a registered property valuer will generally cost somewhere between $300 to $900, depending on factors such as where the property is located.

chevronWhat if original property owner is on a pension?

If the transferor is on a pension the transfer of the property may affect their entitlement to the pension if the property was used to form part of their asset pool.

chevronDoes the transfer of property between related parties affect the first home buyer duty concessions?

The State Revenue Office is of the position that you must have paid market value to be eligible for the stamp duty concessions, meaning that if you have paid less than market value you are not eligible for stamp duty grant or concession.

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