Whilst transferring property titles between spouses might seem like a straightforward process on paper, the tax implications are a different case.
Understanding the process and its complexities in depth before making any moves will help ensure you can avoid unexpected tax liabilities, take advantage of potential benefits, and make informed decisions that align with your financial goals and legal obligations. This article will outline the steps involved in transferring property and explore the relevant tax considerations and legal requirements.
What documents will I need?
The documents required for the transfer of property are:
- Mortgage documentation (if applicable)
- Stamp duty paperwork (or exemption paperwork; if applicable)
- Transfer documentation:
- A recent valuation from a registered valuer (< 3 months old)
- Verification of identity documents
- Purchaser declaration form
Is stamp duty payable on property transfers to my spouse?
Stamp duty is a tax that state and territory governments place on certain documents and property title transfers. Whilst stamp duty does increase the cost of the property transfer, it is a critical legal requirement that makes the transaction legally complete.
However, there are three main exemptions to paying stamp duty:
1. Principal place of residence
No transfer duty is required when transferring residential land between a married couple or de facto partners if the property is either: the family home (principal place of residence) or vacant land intended for use as the site of the family home. For the exemption to apply, the result of the property transfer must be that it is held equally by both parties—either as joint tenants or tenants in common with equal shares.
It’s important to note that de facto partners must have lived together for at least two years to qualify for this exemption. If the family home is partially used for commercial, industrial, or professional purposes, the exemption will apply only to the residential portion. However, if no more than one room is used for non-residential purposes in a business primarily conducted elsewhere, the exemption still applies. For example, if you typically work in an office but occasionally work from home, the exemption remains valid.
2. Joint tenants or tenants in common
If you buy property as joint tenants, the deceased’s share automatically goes to the surviving tenant, regardless of their Will. Most couples opt for this arrangement unless one partner is a business owner, a company director, or involved in a complex family trust or tax structure.
As tenants in common, each party can manage their share independently, and upon death, the share is distributed according to the Will. Shares can be divided in any proportion, but for the stamp duty exemption to apply, they must be split 50%-50%.
3. Investment property
People are often surprised by this, but stamp duty is required for property transfers of investment properties! The exemption only applies to principal places of residence. If no money is exchanged, stamp duty is due on half of the property’s value. If there is a financial transaction, stamp duty is based on the higher of that amount or half the property’s value.
When filing documents with Revenue NSW, you’ll need to provide a recent valuation (typically within the last three months) from a registered valuer, along with your VOI (verification of identity) and a completed Purchaser Declaration. If your valuation is older than three months, Revenue NSW may ask for proof that the property’s value hasn’t changed.
Is capital gains tax (CGT) payable on property transfers to my spouse?
Capital Gains Tax (CGT) is a tax on the profit from the sale or transfer of an asset, such as property. It is calculated based on the difference between the asset’s purchase price and its selling price.
The principal place of residence may be exempt from CGT. This means that if the property was your main home for the entire period of ownership, you might not owe CGT upon its sale. In some cases, you may be eligible for CGT discounts or concessions, such as the 50% discount for assets held longer than one year in Australia.
The gain is calculated by subtracting the property’s cost base (including purchase price, improvements, and associated costs) from the sale price. Various deductions and exemptions may apply.
What is the process for transferring property?
The process of lodging the transfer with the government is relatively straightforward. After completing the transfer form, obtaining a recent property valuation, providing identification, and filling out any required declarations, you can lodge the transfer with the Land Registry. You are required to pay transfer duty based on either the sale price of the property or its current market value, whichever is greater.
Do I need a lawyer to transfer property to my spouse?
It’s important to consult with legal and financial advisors when dealing with property transactions to fully understand all implications. Professional advice ensures that you are aware of potential legal and financial consequences, helps you navigate complex regulations, and can prevent costly mistakes whilst optimising your financial outcomes.
Selecting the right professional to assist with the transfer will help ensure a smooth and efficient property transfer process. When choosing a conveyancer or solicitor, consider their qualifications, experience, and reputation. Ensure they offer the services you need, understand their fee structure, and assess their communication skills. Local knowledge and availability are also important, as is finding someone you feel comfortable with.
Owen Hodge’s expert property lawyers provides comprehensive support, clear communication, and local expertise, all with transparent fees. We provide reliable, professional assistance in managing your property needs.