It’s a very generous move to give property to family members. But there are some things to think about before transferring property to a partner, child or family member even if you’re giving the property to them. After all, you don’t want to damage your estate’s value or negate all the hard work in getting the property in the first place.
Here are some things to think about.
Something we get asked a lot at Crouch & Lyndon Lawyers is what taxes apply when transferring a property as a gift.
Stamp duty or transfer duty
Stamp duty or transfer duty is a tax imposed by the Office of State Revenue on the transfer of property in Queensland. It applies in most situations including when someone signs a contract to buy a home or an investment property, or when someone is given a share in a property as a gift.
Property transfers to partners
Stamp duty may not apply if you are transferring a share of your property to your spouse. But there are some requirements you need to meet.
For the stamp duty exemption to apply in this scenario, the Office of State Revenue requires:
- the transfer must be gifted to your spouse (regardless of whether your spouse becomes a borrower on an existing mortgage);
- the transfer is from you to your spouse;
- after the transfer, you and your spouse will own the home as joint tenants or tenants in common in equal shares; and
- the home will be your principal residence.
Other exemptions to paying stamp duty include transfers ordered by the Family Court of Australia or made through a binding financial agreement (commonly known as pre-nuptial agreement). Binding financial agreements or “pre-nups” are a topic for a whole other blog.
Property transfers to children
As a general rule, most transfers of property will incur stamp duty including where the property transfer is to your child.
But there are exceptions. One of them is where property is transferred because someone has died. For example, stamp duty is not payable when property is distributed from a deceased estate in accordance with the deceased’s will or where a property is transferred to a joint tenant on the basis of survivorship.
What forms are required to claim an exemption?
There are specific documents which need to be lodged to claim an exemption from paying stamp duty. You should speak to a lawyer about what forms are needed for your particular situation.
Capital gains tax
Transferring real estate to a partner, child or family member may also attract capital gains tax.
A person’s main residence (their home) is exempt from capital gains tax unless it’s been used to earn rent or run a business, or it’s bigger than 2 hectares.
Like stamp duty, capital gains tax may not apply where a property is inherited from someone else. Whether capital gains tax applies in this situation depends on things such as whether the property produced an income, for example rental income.
The capital gains tax rules are complicated. There are so many factors that influence what fees and taxes are payable when transferring property to someone else. You should always get advice from a tax specialist or a lawyer about what fees and taxes apply to your particular situation.
Once the documents to transfer the property are signed and stamped, they need to be registered with the Land Titles Registry to update their records.
The Land Titles Office in Queensland publish a registration fee calculator on their website. You can check it out by clicking here.
We recommend asking your lawyer for a quote to prepare and attend to all land title, and Office of State Revenue, requirements.
Your family member’s relationships
This may seem like a strange thing to think about. After all, what does your family member’s relationships have to do with you giving your property away?
Consider these scenarios. You give your property to your daughter and she is married. Your son-in-law may become entitled to share in the property too. If they get divorced, what happens to the property you gifted? What if, heaven forbid, your daughter dies before you do? Or your daughter becomes bankrupt?
Hopefully you’re beginning to see there are many factors to think about before gifting property to family members in Queensland.
The process of transferring property is easy enough. A lawyer or a conveyancer can prepare the documents you need to transfer a property to someone else.
Always obtain legal, financial and tax advice before transferring property to a family member. They will be able to explain the risks and issues relevant to your particular situation. There could be alternatives (for example, testamentary trusts) that give greater flexibility and protection.
Every situation is different. Take time to think about it and get appropriate advice. Don’t rush into it.
Do you need more help? Contact us by clicking here and we’ll help you through it.