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Transferring Property Between Family Members

Transferring Property Between Family Members

6th December 2022

Have you ever wondered how to transfer property between family members in Queensland? This article details some of the factors and considerations involved in transferring property between family members.

A related party transfer is where a person transfers property to a relative, spouse, or de facto partner.

A related party transfer can be required for a number of reasons including:

  1. You are separating from you spouse or de facto partner;
  2. You are selling or buying from a relative; or
  3. You are gifting property to a relative, spouse, or de facto partner.

Transfer Duty

When transferring property to a related party, extra steps must be taken when assessing what transfer duty may be payable.  This includes the requirement for an independent valuation to be conducted on the property to ascertain its value. This can be prepared by one of the following:

  1. A registered Valuer – Evidence of value must clearly identify the residential property being valued by giving the correct real property description and street address. The valuation should give a short description of improvements on the property (if any).
  2. Real Estate Agent – A Real Estate Agent must complete a report showing the three (3) comparative sales for the local area. If it is not possible to give at least three (3) recent comparable sales, because the residential property is located in an extremely remote area where sales are highly infrequent, the Commission will consider the evidence of market value submitted and determine whether any further corroboration is required, based on factors such as the location of the property, the type of property and the interval between sales.

Transfer Duty Exemptions

When transferring property to a spouse or de facto partner, certain exemptions may apply in which no transfer duty will be payable, regardless of the value of the property.  These include:

  1. If you are, or were, married and the transfer is pursuant to a Court Order or recognised agreement, such as a Binding Financial Agreement;
  2. Where the property is, and will continue to be, your primary place of residence and you can provide a copy of the Certificate of Divorce;
  3. If you have been in a de facto relationship for at least two (2) years, and the transfer gives effect to a Court Order or recognised Agreement;
  4. If you are transferring your primary place of residence to your spouse or de facto partner and after the transfer, you and your spouse own the entire house in equal shares.

Relationship Breakdown and Capital Gains Tax

Capital Gains Tax (CGT) is a tax payable on the disposal of an asset that had been purchased after 20 September 1985.  This includes property transferred pursuant to a Court Order upon the breakdown of a relationship.

In situations where an asset is not exempt for CGT, such as with the main residence exemption, property transferred between the parties usually qualifies for the relationship breakdown rollover.

This means CGT, which normally applies when ownership of an asset changes, is deferred. CGT will apply to the person who received the asset when they later dispose of it. The relationship breakdown rollover of CGT only applies if assets are transferred under a Court Order or other formal Agreement.

Relationship Breakdown - Who is liable for Costs?

When the transfer of property is pursuant to a Court Order or other recognised Agreement, the party liable for the costs associated with the transfer such as professional fees, transfer duty and registration fees will be outlined within the Agreement.

When the transfer is pursuant to a non-binding mutual agreement, it will be up to the individuals to determine who will be liable for transfer duty and all other associated fees. It is important that this be discussed between the parties prior to commencing the transfer to avoid any potential delays to settlement.   

Intervention of a Real Estate Agent

When selling property, you would customarily engage a real estate agent in order to find a buyer, negotiate the terms and to prepare a Contract of Sale.  In doing so, this will attract commission fees, customarily at a rate of about 3% of the sale price.  

The benefit of selling property to a related party is that there is no need for the intervention of an agent; saving you commission fees and advertising costs.  However, this can also restrict your ability to call upon them in order to prepare a Contract of Sale when necessary.

When a related party transfer is pursuant to a Court Order or Binding Financial Agreement, no Contract is required. However, if you are buying from a related party, and finance is being sought, the banks will request a Contract before finance can be approved.  Without an agent, a Solicitor can be tasked with drafting a Contract for you.

Electronic Conveyancing

Electronic conveyancing is a platform which allows for an electronic settlement of a conveyancing transaction through an online exchange known as “PEXA (Property Exchange Australia)”. Using PEXA greatly reduces the risk for delays in settlement as any possible bank errors in cheque details are eliminated. While PEXA is most used for general conveyancing matters such sales and purchases, it can also be used to conduct related party transfers. 

If you have any queries relating to a related party transfer or transfer duty, please do not hesitate to contact our office.

This document offers general information only and should not be relied upon as legal advice under any circumstances. Please do not hesitate to contact Rapid Legal Solutions on (07) 4755 9100 to speak with one of our friendly professionals if you require assistance with your Related Party Transfer