I am quite often asked whether stamp duty is payable on a transfer of real property between a married couple or de facto partner.
An example of this type of scenario is when a person has purchased a property prior to commencing their current relationship and they now wish to put that person on the title to that property.
I therefore thought it would be a good idea to set out in very simple terms the circumstances when such a transfer is liable to stamp duty and when it is not.
Principal place of residence
Firstly, the big one – the family home or as it is referred to in the industry, the ‘principal place of residence’.
No transfer duty is payable where a transfer of residential land is between a married couple or de facto partners where the property is either:
- the family home (principal place of residence)
- vacant land, which is intended to be used as the site of the family home.
The end result of the transfer must be that the parties hold the property equally – i.e. either as joint tenants or as tenants in common in equal shares.
It is important to note here that de facto partners must have been living together for at least two years to be eligible for this stamp duty exemption.
If the family home is used for other purposes such as commercial, industrial or professional purposes, then the stamp duty exemption will only apply to the residential part of the home. However, this would be disregarded in circumstances where not more than one room is used for a non-residential purpose where that use relates to a business that is primarily conducted elsewhere. An example of this would be where you usually work in an office but sometimes work from home – the exemption would still apply.
The exemption from stamp duty must be processed with Revenue NSW, it is not automatic. This means that we (on your behalf) need to provide Revenue NSW with the relevant documents for them to grant the exemption.
Those documents include your verification of identity (VOI), a completed Exemption from Duty form and a completed Purchaser Declaration.
If you have any queries on what constitutes your principal place of residence from a legal perspective, then the Revenue NSW website has helpful and useful information – refer to this link.
Joint tenants or tenants in common
There are two ways you can own property in New South Wales with another party – either as joint tenants or tenants in common.
If you purchase as joint tenants, then on the death of one party, that party’s share transfers to the surviving party despite the provisions of their Will. The majority of couples decide to own property this way unless for instance, one of them is a business owner or a director of a company or they have some kind of complicated family trust or tax structure.
If you purchase as tenants in common, then either party can deal with their share as they wish, or on the death of one party, that party’s share will pass in accordance with the provisions of their Will. When you own property as tenants in common, you own separate shares which can be whatever you choose – 90%-10%, 80%/20% or as equal shares being 50%/50%.
It is important to note that to be eligible for the stamp duty exemption, as mentioned above, if you choose to own as tenants in common, your share must be 50%-50%.
Before finalising your decision about tenancy, you should seek advice from your Accountant or financial adviser.
Investment property – Valuation required
This one always surprises clients. In a nutshell – stamp duty is payable! Yes, you heard that right. Stamp duty will be payable on the transfer of the property. The exemption only relates to a principal place of residence.
Assuming that there is no consideration being paid, stamp duty will be payable on half of the value of the property. If however, there is money changing hands, then stamp duty is payable on the higher of that amount or half of the value of the property.
When submitting documents to Revenue NSW, you must provide a recent valuation (usually not less than 3 months old) from a registered valuer as well as your VOI and a completed Purchaser Declaration.
If your valuation is more than three months old, Revenue NSW will require of evidence (at their discretion) that there has been no change affecting the value of the property.
In the unpredictable market that we currently find ourselves in, it is probably much easier to just ensure that your Valuation is not more than three months old.
Exclusions
Please note that the above excludes transfers between:
- foreign transferees – parties who are not an Australian citizen or resident
- marriage, de facto or domestic relationship break ups
Conclusion
If you have any questions regarding this article or require assistance with the transfer of your property or require someone to assist you with any of your conveyancing needs, please contact Coleman Greig’s Property team for assistance.
