Property can be an extremely beneficial investment to keep within the family. But if you’re looking at transferring property to family, or adding a family member to a property title, it’s important to be aware of the tax involved.
In this article we look at what land transfer duty is, when it applies, and where any exemptions may apply.
Contact Liston Newton Advisory today to discuss how we can help make your transfer of land as tax-effective as possible.
But first, what is land transfer duty?
Land transfer duty is a one-off government tax that you pay upon the purchase, sale, or transfer of land or property.
Any situation involving the changing of the property title (the official record of ownership of the property) will result in a land duty event. This includes signing a new contract, transferring a share of the property to another person (even as a gift) and adding another owner to the title. It covers most types of property, too, such as family homes, investment properties, business property, and holiday homes.
The amount of land transfer duty you pay, however, depends on the value of the property, its location, how you use it, and whether or not you live in it. An official property valuation is usually undertaken prior to the transfer to determine its market value.
The duty itself is calculated on a sliding scale, based on the higher of either the price you paid for the property, or its market value. This is known as your property’s dutiable value.
Each state and territory keeps its own record of property titles, so the amount of land transfer duty you pay differs from state to state. As such, be sure to check with your State Revenue Office to determine the land transfer duty rules that apply to your sale. But, as a guide, you can expect to pay anywhere from a few thousand dollars, up to tens of thousands of dollars, in tax for the transfer of property.
What’s the difference between land transfer duty and stamp duty?
If land transfer duty and stamp duty on your property sound awfully similar, that’s because they are. Land transfer duty and stamp duty are simply different names for the same fee, and they’re referred to by different names depending on the state or territory you’re in.
So, do you pay land transfer duty when transferring between family members?
When transferring land or property to a family member, the same State Government rules apply as when transferring to an external party. So unfortunately, yes, you will typically pay land transfer duty any time you buy, sell, or transfer a property from one family member to another.
However, there are some exemptions which we’ll cover off shortly.
Common ways to transfer land between family members
These are the most common ways a transfer of land occurs between family members, where land transfer duty may apply.
- Gifting property to another family member: This is the most common form of transferring property to family members. It can occur from parents to children, between spouses, or a myriad of other ways. It’s important to be aware that when transferred in this way, if the property hasn’t been your primary place of residence, a capital gain event may occur. Therefore you may be required to pay capital gains tax on the property’s market value, as well as land transfer duty.
- Selling property to another family member: This method takes place the same way as a standard property sale. The only difference is that the selling family member may be offering the property at a reduced rate. In this circumstance, though, the land transfer duty is still assessed against the property’s market value—and so is capital gains tax. The reduced sale rate doesn’t have an impact on the taxes charged.
- Changing ownership proportions on the title: This occurs when owners add another family member to the title, or they change their proportion of ownership. This can help to reduce the individual’s taxable income on the property, and can also help to create a level of distance between the asset and each owner.
For all these transfer methods, as well as CGT events and land transfer duty, there may also be pension impacts for older family members. The transfer of a property is assessed on the property’s market value, and if you have a pension, this is considered as generating income. Even if money isn’t actually paid for the property, the market value of the property is added to a person’s pension assets test. This can end up reducing the amount of pension you’re able to receive.
Exemptions to paying land transfer duty
In some circumstances it may be possible to transfer property without paying stamp duty, as there are some exemptions to paying land transfer duty between family members. We’ve broken these stamp duty exemptions down state by state. Please note, though, that this is not an exhaustive list. There may be specific exemptions based on your current situation, so it's best to check with your local state or territory to understand more about your land transfer duty obligations.
Victoria
Land transfer fees in Victoria may not apply when related to the transfer of a family home between married or de facto couples. This includes as part of divorce proceedings, or related to deceased estates.
New South Wales
Married or de facto couples may not need to pay land transfer duty if the property is their primary place of residence. They may also be exempt if the transfer is part of divorce or relationship breakdown proceedings.
Queensland
Married couples who transfer property between themselves can receive an exemption from land transfer duty, both in a relationship and as part of breakup proceedings.
ACT
Couples can be exempt from land transfer duty payments if the transfer is between each other for their primary place of residence. They can also receive an exemption if the transfer is related to relationship breakdown, deceased estates, or as part of a will. An interesting rule here is for farmers: they may be able to receive an exemption if they’re transferring primary production land to another generation of family.
Tasmania
Tasmanian married or de facto partners may be exempt from land transfer duty when transferring property from one partner to the other. However, transferring from both partners into just one partner’s name does not receive an exemption.
South Australia
South Australia has the tightest land transfer duty rules. As such, land transfer duty exemptions in SA are only available as the result of a deceased estate transfer, or on property deemed ‘qualifying land.’ This covers industrial, commercial, mining, or recreation land.
Northern Territory
Married or de facto partners are generally able to receive a land transfer duty exemption when transferring between themselves, either as part of the relationship or upon relationship breakdown. Similar to the ACT rules, farmers may also receive an exemption when transferring primary production land between family members.
Western Australia
Western Australians can only receive a land transfer duty exemption if the transfer of a title is for a family farm, or it’s between married or de facto partners. Both parties must be the sole joint tenants with equal share in the title. A minor exemption is available upon breakdown of a relationship or as part of a deceased estate—an insulting $20 fee.
The final word
As you can see, it’s quite difficult to transfer property without paying land transfer duty—but it can be done.
So if you’re looking to transfer land between family members, be sure to speak to a land transfer duty expert first. They can provide you with the right advice on how to minimise the payable fee, and make sure there are no other tax surprises waiting for you.
