The two certainties in life are death and taxes – unless you can claim a tax exemption! There are a number of avenues available to home owners to transfer property without paying the dreaded stamp duty – and you don’t have to be a first home buyer to apply.
Exemptions and concessions apply in the following circumstances:
- Break-up of marriage or de-facto relationship
- Deceased Estates
- Transfer of a principal place of residence between married or de facto partners
- Transfer of land used for primary production between family members
Since we don’t generally plan for the first two situations, we are going to focus on the last two.
Transfer of a principal place of residence between married or de facto partners
It is becoming more common for people to wait longer than our parents did to take the plunge and get married. Many individuals are now entering the property market without waiting for Mr or Mrs right to come along, or find themselves the sole owner of their property later in life following a relationship breakdown and subsequent property settlement.
When you then enter into a new relationship, you may wish to share your asset pool by adding your partner onto the title. The good news is that Revenue NSW offer an exemption from stamp duty for transfers of a principal place of residence between married or de facto partners.
Why add a partner onto the title of my house?
Apart from a desire to share your life with your spouse, there are advantages to holding your property in both names, particularly as joint tenants. When one joint tenant dies, the title automatically passes to the surviving tenant, known as the “right of survivorship”. This can act as an effective tool in decreasing the value of your asset pool once you pass away, since jointly held assets aren’t counted in calculating the value of your estate.
Alternatively, if for example you have a blended family and instead each want to have the flexibility of passing on your half share of the house, you can elect to hold the property as tenants in common in equal shares.
What if I use some of the property to work from home?
If you use no more than one room to work for a business that is primarily conducted elsewhere (for example, if you sometimes work from home instead of at an office), you can still claim the exemption. If you are using more than one room, the exemption does not apply; however, you may be able to make an application for a reduction in the duty payable based on the proportion of your home that is used for residential purposes.
What if I already co-own my property with someone who is not my spouse? Can I still transfer half of my share and claim the exemption?
Yes, you can. If your interest is held equally with your spouse after the transfer, the exemption will still apply.
Can I transfer property to my spouse and another person?
No. Both you and the person you are transferring your property to must be married or de facto partiers. No other people may be a party to the transfer in order to claim the exemption.
How long must I live with my partner to claim the exemption?
If you are not married, in order to claim the exemption as a de facto couple you must have lived together as a couple for at least the two years before the date of the transfer.
What if I own a vacant block of land, and intend to build a home in the future?
The good news is that you don’t need to wait until your house is built to claim the exemption. Vacant land which is intended to be used as your principal place of residence is eligible.
Transfer of Land used for Primary Production Between Family Members
Primary production land is eligible for a number of concessions and exemptions, including an exemption from land tax. Transfers between family members (previously known as ‘intergenerational transfers’) are exempt from stamp duty where the land is being used, and will continue to be used, for primary production.
Why transfer my land?
As above, transferring your land via a stamp duty exemption is a very effective tool in succession planning. It is common for farming land to be owned by Mum and Dad (or even Grandma and Grandpa) while the younger generations are both living and working there. This can result in asset-poor family members who are contributing to the operation and success of the farming enterprise, who may be adversely affected by issues such as their ability to obtain a loan, as well as a lack of security in their future, both professionally and personally.
It is always worthwhile to discuss your plans for the succession of your family business, particularly one tied to property. Leaving things to the last minute and simply writing them in your will can run the risk of your family members being surprised, angry, and confused – particularly if one child is favoured over others by inheriting the family farm. Talk things through and consider handing over the reins early to avoid a contested estate and a family breakdown.
There are also other benefits to transferring the family farm – it may assist you in qualifying for social security benefits once you have retired and may have taxation advantages, both of which you should discuss with your accountant.
Who qualifies as a ‘family member’?
Unlike the above exemption, there is a very wide class of people that you may transfer your primary production land to and still claim an exemption from stamp duty. You can transfer land to spouses, parents, brothers, sisters, children, grandchildren – even your in-laws and ex-spouses!
What is ‘land used for primary production’?
Eligible transactions are for land that is exempt from land tax under the relevant primary production exemption of the Land Tax Management Act.
If you think that you are eligible for one of the above exemptions and wish to apply, contact our office to speak to our conveyancing team today.