Do you pay land transfer tax between family members?

Transferring or gifting land or property to one of your family members might be something you've thought about. There’s plenty of reasons why this might be on your radar, and the main drivers we see for transferring ownership are for tax reasons, to help a family member get a start in the property market, to transfer a future inheritance early or to protect your assets. 

Before you make the decision it’s important for you to understand the legal implications and charges that may be involved in the process. These rules vary from state to state so seeking out qualified and tailored advice is recommended.

We take a closer look at what circumstances you will pay land transfer tax between family members and when exemptions may apply.

What is land transfer tax, and what’s the difference between this tax and stamp duty?

The term land transfer tax may not always be the common name in your State when it comes to fees involved on the transfer of land or the purchase of property. 

Most people would likely know this charge has stamp duty. But over the years the different states and territories have settled on their own names for this fee. For example, in NSW it is called transfer duty, in Victoria it is land transfer duty, the ACT it is conveyance duty and in Tasmania it is simply referred to as duty. 

So for the purpose of this article we will refer to it as land transfer tax, but it’s important to know you might know it as stamp duty.

What are the common ways to transfer property between family members?

There are three main ways to transfer ownership of a property from one family member to another. This includes gifting, selling and changing the ownership share. 

Gifting property to family members 

Sometimes people will consider gifting property to a spouse or their children. This is particularly common for people who own multiple properties. 

Even when the property is gifted, you still have to pay duty on the market value of your property. You may also have to pay capital gains tax (CGT) if the property has not been a principal place of residence.

Selling property to a family member 

This would operate in a similar way to a normal property sale in that a Contract of Sale would be entered into between the family members. 

Often what happens in these circumstances is that the contract price of the sale will be less than the market value of the property. However, it is important to know that the land transfer amount is based on the property’s market value. So that needs to be taken into consideration when choosing this approach.

Changing ownership share between family members

The last option is to change the ownership proportions in an already jointly owned property between family members. Or adding another family member on Title.

This can sometimes be a tax effective or asset protection strategy for a couple that owns a property.

Understanding property titles 

When you buy or sell a property, the change of ownership needs to be recorded by the Government. This is referred to as a property title and includes information on who owns the land. Each state and territory is responsible for keeping their own register of these titles. 

If you are looking to transfer a property or land between family members, then from a property title perspective it’s the same process as any other property transfer. 

The only difference is that in certain circumstances when family members are involved there may be an exemption to the need to pay land transfer duty, or stamp duty as it is sometimes known more commonly as. There is a common misconception that no transfer duty is payable for family transfers, but this is not the case in all circumstances, there are only a few times when this fee is not payable. Further on in this article, we’ll cover what exemptions apply in each state and territory.

What are the pros and cons of transferring property to a family member?

Asset protection and potential tax advantages are common reasons for transferring the property title to another family member. But expert advice should always be sought before making any decision, as your personal circumstances need to be taken into account. 

By seeking out advice you’ll also be given guidance on the possible capital gains tax implications as well as any impact you might have on your government pension entitlements.

Exemptions to paying transfer duty, or stamp duty - A state by state view 

Each state and territory has different rules when it comes to the fee payable when transferring property to family members. Plus there are different exemptions that apply in each state too.  So when considering the transfer of property to a family member you want to ensure you are seeking advice from someone that knows the applicable legislation and fees in the state that the property is located in. 

You’ll find here a summary of the current exemptions in each state that may be applicable to a transfer of property between family members.

New South Wales 

You can visit the Revenue NSW website for a calculator to help determine what amount of transfer duty may be payable. The exemptions that are available in NSW suggest that no transfer duty is payable if:

• The transfer is between married couples or de facto partners (living together more than 2 years) and the house is your principal place of residence, or vacant land that is intended to be used as the site for a family home.
• A domestic relationship breaks up (for example, a divorce occurs) and a title transfer is required. In this circumstance, the property can be transferred to either of the partners in the relationship, children of either partner, or a trustee for a child of either partner
• If you received property from a deceased estate as detailed in a will, you pay transfer duty at a concessional rate of $50.

You can see the details on all exemptions on the Revenue NSW website.

Victoria 

The State Revenue Office of Victoria details information on exemptions and concessions in relation to what they refer to as transfer duty. Exemptions relating to family members for property in Victoria include:

• Transfer between a spouse or partner, which includes transfers arising out of a breakdown of a relationship. Before 1 July 2017, transfers between spouses or domestic partners were exempt from duty regardless of the type of property. Since 1 July 2017, only transfers of a principal place of residence are exempt.
• Deceased estates also receive an exemption on a transfer of land by the executor of the will to a beneficiary.
• In certain circumstances, the family farm may also be exempt. 

You can check all of the exemptions and concessions on the State Revenue Office website. 

Australian Capital Territory 

In the ACT, the duty is called “conveyance duty”. The ACT Revenue Office provides information on this tax. Conveyance duty is not payable on a transaction made under a family court order. Conveyance duty is also not payable on transfer of property to your partner, if the property is your principal place of residence. 

The tax is also typically not payable when a property is transferred as part of a deceased estate. You can check out all of the conveyance duty exemptions on the ACT Revenue Office website.

Queensland 

The Queensland Government website details the exemptions where transfer duty is not payable. This can include when transferring ownership in a principal place of residence to a spouse. An exemption also applies when there is a relationship breakup and a court order or agreement is involved. 

A transfer duty exemption can also apply to the transfer of property that results from a person’s death. Such as when property is distributed from the person’s estate to the beneficiaries of their will. 

You can see the full details of all exemptions on the Queensland Government website.

Northern Territory 

In the Northern Territory, the transfer of property between family members is only exempt from stamp duty when the transfer is between married or de facto partners, or is the result of a court order or binding financial agreement after a relationship breakup. An exemption may also be available if a farm is being passed between family members.

The NT Government has a Stamp Duty Lodgement Guide which details all current exemptions.

South Australia 

Revenue SA details that stamp duty is payable on all title transfers except those deemed to be of “qualifying land”. This includes commercial, industrial, recreation and mining land.  

However, some exemptions can apply to residential property and land if the transfer involves removing a name from a title as a result of the death of one of the joint tenants (a co-owner of the property), or if there is a “certified domestic partnership agreement”.

You can view more information about stamp duty in SA on the Revenue SA website. 

Western Australia 

Exemptions may be available if you’re transferring a property title of a principal place of residence between spouses or de facto partners. A “nominal transfer duty” fee of $20 is payable if the title is transferred as a result of a relationship breakdown; or if it is for a deceased estate. The passing of a family farm to another family member may also be exempt in WA.

You can view all details in relation to transfer duty in WA on the WA Government website.

Tasmania 

Duty, as it is known in Tasmania, is charged when someone acquires  property in the state. Duty exemptions are available when property is transferred between partners in a marriage, a significant relationship or a caring relationship if the property being transferred is a principal place of residence.

The State Revenue Office of Tasmania website details further information on property transfer duties.

Consider your options before transferring property to family members 

Before going ahead and transferring a property to a family member you need to ensure you are aware of all of the costs involved. As well as any implications you might have in terms of tax and impacts on government pensions.