It’s the ‘bill shock’ no one wants and can cost tens of thousands. Being slapped with stamp duty on a property transfer from your ex-partner to you after a separation.
We often hear from separating couples, wanting to transfer their property to one party of the relationship, as part of a property split.
Most do not take stamp duty into consideration in these circumstances because neither party is “buying” the share from the other. “We already own it!” we often hear. However, stamp duty is payable on the share of the property being transferred unless specific requirements are met.
Stamp duty exemption
Section 68(1) of the Duties Act 1997 (NSW) provides that no duty is chargeable in respect of a transfer of dutiable property arising from the:
(1) Break-up of marriage; or
(2) Break-up of de facto relationship
if the property is to be transferred to
(i) the parties to a marriage or de-facto relationship that has irretrievably broken down;
(ii) either of the parties to such a marriage or relationship;
(iii) a child or children of either of the parties to such a marriage
as long as the transfer or agreement is affected by or in accordance with a financial agreement made under sections 90B, 90C, 90D, 90UB, 90UC or 90UD of the Family Law Act 1975 or an order of a court under that Act.
Separating couples need to ensure that they speak to an experienced family law lawyer to ensure that the transfer is effected in a way that ensures that the stamp duty exemption is applied.
Given the property process in Australia generally and NSW in particular, utilising this exemption can save tens of thousands and in some cases, hundreds of thousands of dollars.
Stamp Duty Without Orders or an Agreement
Unless one of the exemptions in the Duties Act 1997 (NSW) is met, stamp duty will apply and is calculated on the greater of:
(a) the consideration or amount one party pays the other for the share of the property; or
(b) the actual market value of the share, as determined by an independent valuation conducted by a registered property valuer.
The cost of seeking legal advice from an experienced property and family lawyer is very quickly made up for by the saving in stamp duty. It also offers the benefit of finally severing the financial relationship between the former spouses, giving each party the peace of mind and freedom to move forward with their life.
Other practical implications of property transfers
No two situations are ever the same. The transfer of property does not finally determine the financial relationship between former spouses or partners. Either party may still apply to the Court for a property settlement in accordance with the Family Law Act 1975 unless that transfer is undertaken as part of a wider property settlement that is contained in approved consent orders or in a Binding Financial Agreement (colloquially known as a pre-nup or post-nup).
It is advisable that you consult with an experienced family law solicitor who can prepare the most appropriate documents for your circumstances, being either consent orders or a Binding Financial Agreement (BFA) with your former spouse. This document will set how all property of the relationship is be divided between the parties.
Once these documents are finalised, the exemption in the Duties Act will apply, that is, no stamp duty will be payable on property transferred between the parties arising from the consent orders or Binding Financial Agreement.
Liability limited by a scheme approved under Professional Standards Legislation. This post provides a general overview and should not to be relied upon as legal advice or as a substitute for legal advice or as giving rise to a solicitor / client relationship. If you want advice specific to your circumstances, please contact us to arrange an appointment.