Whether it's due to a separation, gifting property, or transferring to a relative, understanding the steps involved in a related party transfer is important. This article will guide you through the essential factors to consider when transferring property within the family.
What Is A Related Party Transfer?
A related party transfer occurs when property is transferred between relatives, spouses, or de facto partners. The reasons for such transfers will vary, and may include:
Separation from a spouse or de facto partner
Gifting property to a family member, spouse, or partner
Transfer between relatives
The parties are referred to as a transferor or a transferee in this context. To put it simply:
Transferor = Giver (the one transferring the asset)
Transferee = Receiver (the one receiving the asset)
Our Process
Law firms are all different in how they assist clients with related-party transfers; some firms will have clients complete the required government forms, and lodge them without understanding the unique circumstances and how these may impact their goals.
What sets RHC Solicitors apart is our client-focused approach combined with a simple electronic process to ensure we have all the information needed from the start.
Whilst it may be easy to think that adding a spouse onto title should be 'simple', there are a range of considerations in property law and common law that you, as the current owner, always need to consider. Our simple digital forms, and our range of free digital resources, provide everyone with all the information needed for things to proceed smoothly. Where court orders and other agreements are involved, our conveyancing team work closely with our solicitors to ensure your obligations are being met and rights are being protected when needed.
Our team is dedicated to clear communication, fee transparency, and realistic timeframes to ensure you not only feel supported and looked after, but are being provided with a comprehensive legal service. If you're interested, get started today by getting a no-obligation free quote to see learn more about how we can help.
Transfer (Stamp) Duty Considerations
When transferring property to a related party, additional steps must be taken to determine and assess the correct transfer duty payable to Queensland Revenue Office (QRO). One of the key requirements is obtaining an comparative market analysis (CMA), which is an independent valuation of the property.
Under Public Ruling DA505.1.2 issued by the Commissioner of State Revenue through the Queensland Treasury, it is a requirement in specific circumstances that a valuation or CMA must be provided for a dutiable transaction involving residential property that includes:
a person in the transaction being a member of the family of another person in the transaction (for example, parent to child or spouse to spouse and the like);
one or more of the persons in the transaction is a corporation and there is an element of association with another person in the transaction by way of directorships, shareholdings, partnership or joint venture arrangements (for example, where the director is transferring the Property to themselves or a family member of themselves);
there is no consideration (money flowing from one person to another) for the transaction (for example, for natural love and affection or by way of gift);
the consideration cannot be ascertained when the liability for transfer duty arises.
A real estate agent can generally undertake a CMA, and will provide a report of at least three comparable sales from the local area. In rare cases, such as properties in remote locations, fewer comparable sales may be accepted based on market conditions and other factors.
The reason for obtaining a CMA is simple: it ensures that any transfer duty payable is calculated based on the market value of the property, not the consideration given under the transfer. An example of this is where a parent is gifting their property to a child for less than market value (e.g. a child pays the parent $500,000 for a $1 million property).
Transfer Duty Exemptions
In certain cases, a transferee (the incoming owner) may be eligible for exemptions from transfer duty when transferring property to a spouse or de facto partner.
Some common exemptions include:
You are married or were married, and the transfer is part of a Court Order or Binding Financial Agreement (BFA)
You have been in a de facto relationship for at least two years, and the transfer is part of a Court Order or formal agreement
You are transferring your primary residence to your spouse, resulting in joint ownership of the home in equal shares
For a complete breakdown on transfer duty exemptions, we recommend taking a look at Queensland Revenue Office's website by clicking here.
Capital Gains Tax (CGT) Considerations
Capital Gains Tax (CGT) is a tax levied on the disposal of assets acquired after 20 September 1985, including property.
Generally, if you were a resident of Australia for tax purposes, and the property has been your principal place of residence for the entire time you have owned it, the transferor will be exempt from CGT.
However, in cases of relationship breakdowns, transfers may qualify for a CGT rollover, deferring the tax until the recipient sells the property. This rollover only applies if the transfer occurs under a Court Order or formal agreement.
If you want to learn more, we recommend speaking with your accountant or financial advisor. RHC cannot provide financial advice in respect to property transactions.
Frequently Asked Questions
Who Covers The Costs Of A Property Transfer?
When property is transferred due to a Court Order or formal agreement, the agreement will typically outline which party is responsible for transfer costs, including professional fees, transfer duty, and government registration fees.
If the transfer is not formalised through an agreement, it is vital for both parties to agree on who will cover these costs to avoid any delays or further disputes. Typically, you will see each party cover their own costs.
It's important to note that the transferor (existing owner) and transferee (incoming owner) do not need to use the same legal representation. This is commonplace in family law matters, so as to a avoid conflicts of interest.
For amicable transfers (e.g. a new spouse or children), it is preferable for one solicitor to assist all parties so they all the necessary information and things can proceed smoothly.
Do You Need A Real Estate Agent?
One benefit of transferring property to a family member is that you can bypass the need for a real estate agent, saving on agent commission and advertising fees.
Note that, particularly if finance is required, a contract of sale may still be necessary, as some financiers will require a formal agreement to be in place. While a real estate agent can generally prepare a contract, a solicitor can also assist with drafting it if needed. You may alternatively seek another type of agreement specific to your transaction.
We recommend contacting us to discuss this further if your financier has stated they need a signed agreement between the parties.
Why Can't I Just Do It Myself?
With the rise of platforms like PEXA (Property Exchange Australia), electronic conveyancing has become the go-to method for settling transactions online. PEXA minimises settlement delays by reducing human error, and provides more efficient electronic lodging of government forms.
PEXA is generally faster and cheaper than a traditional 'paper' settlement, particularly for rural transactions. Where money is being transferred, as is often the case for court-ordered transfers, funds are transferred faster and more securely as well.
There are also a range of government forms that must be prepared, executed and lodged, and it is always recommended a solicitor prepare these documents to avoid later requisitions or delays.
For these reasons, this is why we always recommend you engage a professional and affordable solicitor to guide you through a transfer, ensuring that all necessary documents are prepared and lodged correctly.
Need Help With A Related Party Transfer?
If you have any questions about transferring property between family members or want to understand more about our unique process, our dedicated conveyancing team are always here to help.
Don't hesitate to contact us today to discuss your specific circumstances and ensure a smooth and compliant transfer process.
Disclaimer: This publication is not intended to be comprehensive, nor does it constitute legal advice. We are unable to ensure the information is current and there is no guarantee in relation to accuracy. You should seek legal or other professional advice before acting or relying on any of the content of this publication. The views and/or opinions expressed in this publication is that of the author and may not necessarily represent the views and/or opinions of RHC Solicitors.
RHC Solicitors ©