Stamp Duty on a Divorce Property Settlement

Divorce brings a host of financial challenges, especially when sorting out property settlements. One of the major concerns is stamp duty, which can add significant costs to transferring property. This article will dive into how stamp duty exemptions come into play during divorce property settlements, offering insights into how these exemptions can impact your financial arrangements and potentially ease the settlement process.

 

Understanding Stamp Duty in Divorce Property Settlements

Stamp duty is the fee that is charged to the purchaser of property. The cost of the duty is determined based upon the sale price of the property being transferred. Therefore, the more valuable the property, the more the buyer owes to the government in transfer duty.

However, when property is being transferred and/or sold as the result of a divorce or dissolution of a de-facto relationship, it is possible to avoid making a payment of Stamp Duty. It is also possible to avoid Stamp Duty when the property is being put into a trust for the welfare of the couple’s children or being outright transferred to their children.

 

Relevant Legislation

In New South Wales, stamp duty exemptions for divorce property settlements are governed by the Stamp Duties Act 1920, with oversight from the NSW Revenue Office. This legislation allows for stamp duty exemptions on property transfers between spouses or de facto partners as part of a divorce settlement. The exemptions apply to both residential and commercial properties, provided the transfer is part of a legal settlement or court order.

The Family Law Act 1975 and state tax regulations work together to offer stamp duty exemptions during divorce property settlements. This collaboration ensures that the financial burden of stamp duty does not complicate or add to the costs of settling property disputes in divorce cases. To qualify, the property transfer must be linked to the divorce or separation and detailed in the financial agreement or court order. The NSW Revenue Office offers guidelines and handles the exemption applications, ensuring all legal requirements are met. For more information or to apply, you can check the NSW Revenue Office’s website or get in touch with them directly.

 

Qualifying Conditions

To take advantage of the Stamp Duty exemption, you must meet one of the following obligations:

• The transfer of property must be completed via the Court. Meaning that the transfer must occur as a result of a Court Order obtained via the Family Law Act, or;
• The transfer must be memorialised in a formal and binding financial agreement made in accordance with the Family Law Act.

If you do not meet either of these obligations, you and your spouse/partner will not be exempt from paying transfer taxes. If you meet one of these two requirements, you still must complete the process of applying for your exemption.

Essential Documents

1. Court Orders: Include a copy of the court order from the Family Court or Federal Circuit Court that outlines the property settlement.
2. Binding Financial Agreements: Provide the signed agreement that details the terms of the property division between parties.
3. Property Transfer Forms: Complete and submit the relevant forms, such as the Notice of Sale and Transfer of Land forms.
4. Proof of Relationship Breakdown: Include documents like separation certificates or divorce certificates to verify the relationship status.

Submission Process

1. Prepare Your Documents: Collect all required documents and make sure they are correctly completed and signed. This includes court orders, binding financial agreements, and property transfer forms.
2. Fill Out the Exemption Application: Complete the stamp duty exemption application form available from the NSW Revenue Office. You can find this form on their website or get it from their office.
3. Submit Your Application: Send your completed application form and supporting documents to the NSW Revenue Office. This can be done online via their e-Services platform, by mail, or in person.
4. Wait for Approval: The NSW Revenue Office will review your submission. Once approved, they will provide confirmation of the stamp duty exemption.
5. Respond to Requests: If there are any issues or additional information needed, the NSW Revenue Office will reach out to you. Ensure you address any requests promptly to keep the process moving smoothly.

 

Application Procedure

When attempting to exact your Stamp Duty exemption, it is imperative that all of the following steps are taken. As such, once you decide to embark upon securing a transfer exemption, it is highly recommended you engage the services of a solicitor who is experienced and knowledgeable in this legal transaction. If you miss a step, or complete one improperly, it could result in the denial of your application or slow down the process of receiving your approval and exemption status.

 

You must complete all of the following:

1. Provide a copy of your Court Order or your binding financial agreement, which clearly states that the property is being transferred to a spouse, partner, child or trustee for the children of the relationship as a result of the dissolution of the relationship. 
2. Complete the land transfer form, which can be viewed and downloaded from the Land and Property website. 
3. Complete the application for exemption and/or refund due to dissolution of marriage or partnership. 
4. Complete the purchaser declaration form which will require you to declare that you were a married/de-facto couple and that the property is being transferred due to the breakdown/dissolution of the relationship/marriage. This form will also require you to provide detailed information about the property/transfer persons/liabilities and the overall nature of the transfer of the property. This form must be returned to the Revenue NSW. Keep in mind that the Revenue NSW can request supplemental proof and/or documentation at any time for the purpose of verification of the information you provide. 
5. Take all of the information and forms from the preceding four steps and send it to Revenue NSW. Before sending the documents be sure to make copies for your personal records. You might also want to send the envelope/package with some form of return verification of receipt. 
6. Finally, if your application is approved you will receive notice from Revenue NSW that your Stamp Duty requirements have been waived.

 

Disputes Over Property Value

Disputes over property valuation can significantly complicate divorce settlements and impact the stamp duty exemption process. When the value of the property is contested, it can lead to delays and additional legal costs, as both parties may need to engage independent valuers or experts. These disputes can affect how the exemption is applied, potentially leading to disagreements about the exemption amount or eligibility. Accurate property valuation is crucial for ensuring that the stamp duty exemption is correctly applied and that both parties reach a fair settlement. Addressing valuation issues early on can help streamline the process and reduce complications related to the exemption.

 

Conclusion

While it is true that there are many important moving parts to a smooth and successful dissolution of a marriage or partnership, these steps to exonerate yourselves from paying Stamp Duty taxes should also be considered crucial for the financial health and welfare of your family moving forward. Therefore, if you are in the process of separating from your spouse or partner, it is wise to take the time to review your options with a solicitor. 

If you find yourself in need of assistance with this or any other legal issue, please contact the law offices of Owen Hodge Lawyers. At Owen Hodge, we are always happy to assist clients in understanding the full ramifications of any and all of your legal needs. Please feel free to call us at your earliest convenience to schedule a consultation at 1800 770 780.