Usually, when transferring ownership of property you will attract a hefty stamp duty bill – even if you are simply taking one partner’s name off the Title.
What is Stamp Duty?
Stamp duty (aka as transfer duty) is a tax imposed by Australian state and territory governments on certain transactions, including the transfer of property. When you buy or acquire an interest in property, such as during a divorce or separation, stamp duty is generally payable. The amount of stamp duty varies depending on the property’s location and value. This tax can be a significant financial burden, particularly in property settlements following a relationship breakdown.
An Stamp Duty Exemption example
For example, let’s say you own an investment property in Parramatta, New South Wales (not the family home) valued at $985,000.
If the property is owned by one partner and transferred to the other spouse / partner, then the stamp duty would be $38854.
But if the property is owned jointly, and is being transferred from the name of both spouses/de facto partners, to the name of one spouse/de facto partner only then the stamp duty of $19427 (because the duty is calculated on a 50% share of the property).
BUT the Family Law Act provides that NO stamp duty (or other tax) is payable under any State or Territory law with respect to property that is dealt with in a Financial Agreement.
SECT 90L of the Family Law Act 1975 states:
“Financial and other agreements etc. not liable to duty
None of the following is subject to any duty or charge under any law of a State or Territory or any law of the Commonwealth that applies only in relation to a Territory:
(a) a financial agreement;
(b) a termination agreement;
(c) a deed or other instrument executed by a person for the purposes of, or in accordance with, an order or financial agreement made under this Part.”
What does this mean for you?
Partners can transfer property such as houses by using a Financial Agreement and be exempt from paying stamp duty.
This means that if you transfer property pursuant to your Financial Agreement, you will be exempt from stamp duty.
When applying for an exemption, you may need to provide the Office of State Revenue in your state of territory with a copy of your Financial Agreement, together with any other documents they may require.
Each state and territory has different procedures and requirements – you can view these and more by clicking on the links below.
If you have already paid stamp duty on a transfer of property in line with your Financial Agreement, most states will allow you some time to claim a refund.
Things you need to know
- The exemption applies to both married and de facto family law agreements.
- The property for which an exemption is being sought must be specifically referred to in your Financial Agreement.
- Motor vehicles and other types of property which would normally incur transfer duty or tax are included under these provisions.
- The person to whom the property is being transferred must be either a party to the marriage or de facto relationship, a child or children of either or both of the parties or a trustee for a child or children of either or both of the parties to the marriage or de facto relationship.
Case Study: How a Financial Agreement Saved Sarah and Mark Thousands in Stamp Duty
Sarah and Mark had been married for 12 years when they decided to separate. They had jointly purchased a family home, and after their separation, it was agreed that Sarah would retain ownership of the property. Initially, they were concerned about the costs involved in transferring the property into Sarah’s name, particularly the substantial stamp duty fee.
After researching their options, they decided to formalise their property settlement through a Binding Financial Agreement. This legally binding document outlined the terms of their property division and, crucially, made them eligible for a stamp duty exemption. Because their financial agreement met the requirements of their state’s revenue office, Sarah did not have to pay the hefty stamp duty, saving her tens of thousands of dollars in additional costs.
The ability to use RP Emery’s Financial Agreement Kit provided a simple, cost-effective way for Sarah and Mark to protect their financial interests and procure a stamp duty exemption during their property settlement.
Helpful Links
Please let us know if these links are broken – the government website tend to update their links and change the page addresses.
Victoria Office of State Revenue