Transferring property to a family member in Victoria

Most people assume that if no money changes hands, there is no stamp duty. In Victoria that assumption is wrong more often than it is right.

Family transfers are common in the South East growth corridor. A parent helps a child into a first home. A couple in Clyde North marry and want both names on the title. Two siblings inherit a block in Devon Meadows and one wants to buy the other out. Every one of those is a dutiable transaction unless a specific exemption applies, and the exemptions are narrower than people expect.

Duty is worked out on what the property is worth, not what you charge

The State Revenue Office assesses land transfer duty on the dutiable value of the property. That is the greater of the price you paid or the market value. When two strangers deal with each other at arm's length, the SRO accepts that the price is the value. When you and the other party are related, it does not.

Putting a nominal price on the transfer does not lower the duty. Transferring the family home to your daughter for $1 is assessed exactly the same way as a gift, which is on full market value.

Here is what that looks like in practice. A $750,000 house in Cranbourne East transferred to an adult child attracts duty of $40,070, using the general rate of $2,870 plus 6% of the dutiable value above $130,000. The concessional rates for a principal place of residence do not help at that level, because those rates stop applying above $550,000.

That is a real bill, and families often discover it after the decision is made.

Adding or removing a spouse or partner

This is the one scenario with a genuine exemption, and it is tighter than its reputation.

The spouse and partner exemption removes duty from a transfer between spouses or domestic partners when every one of these is true:

The exemption only covers a home one of you actually lives in. A rental you have never lived in will not qualify, and neither will bare land. That one condition rules out a lot of transfers people assume are exempt.

Say you own a rental in Lynbrook worth $600,000 and you want your partner on the title. You are transferring a half share, so the dutiable value is $300,000, and duty on that comes to $13,070 at the general rates linked above. The same transfer on the home you both live in would be exempt.

One useful detail. The SRO treats the transfer as being for no consideration even where the incoming partner takes on an existing mortgage of the same or a greater amount, or grants a new mortgage securing the existing debt. What it will not accept is an arrangement built specifically to fit inside the exemption.

Removing a name is a separate problem from removing a debt. Your lender has to agree to release the departing person from the loan, and that is a credit decision, not a conveyancing one. Start that conversation with the bank early.

After a separation

A transfer between separating partners can be exempt from duty, and in Victoria it does not take a court order to get there.

Section 44 of the Duties Act 2000 exempts a transfer made solely because of the breakdown of a marriage or domestic relationship. The conditions are that the transferor and transferee are parties to the relationship, that no other person takes or is entitled to take an interest in the property, and that both sides are people rather than a company or a trust. There can be at most two transferees. A dependent child of the relationship can also be a transferee in some cases.

You do not need a court order. The SRO's evidentiary requirements call for a statutory declaration that names the parties to the relationship and confirms the transfer is being made solely because of the breakdown. A consent order or financial agreement is not listed as a requirement for the exemption itself.

That said, deciding who gets what is family law, and we are not family lawyers. If your property settlement is not already agreed and documented, see a family lawyer first. We can tell you what a transfer will cost in duty and what the SRO needs from you. We cannot advise you on whether the split is fair or on how to protect your position.

Parent to child, and gifts to everyone else

There is no general family exemption in Victoria. Parent to child, grandparent to grandchild, brother to sister, aunt to nephew: all dutiable, all assessed on market value, whether or not money moves.

The one real exception is primary production land. The family farm exemption can remove duty on a transfer of farmland between relatives, where the land qualifies as primary production land for land tax purposes, there is a familial link between the parties, and the transfer is not made principally to get the benefit of the exemption. Relatives for this purpose include lineal descendants and ancestors, siblings, a partner, and nieces, nephews, uncles and aunts. There is still working farmland behind Clyde and out towards Devon Meadows, so this comes up here more than you would expect.

Property passing from a deceased estate follows a different set of rules again. If that is what you are dealing with, it is worth treating as its own matter rather than assuming the gifting rules apply.

You will almost certainly need a valuation

Because you and the other party are related, the SRO will not take your word for what the property is worth. It requires you to declare market value supported by an independent valuation, prepared by a valuer certified by the Australian Property Institute with experience in that property type.

A council rates notice is not going to be enough. The SRO says rating values are based on general market data rather than the specific property, tend to be conservative, and rarely provide an acceptable value for duty purposes. A letter of appraisal from a real estate agent sits in between. Agents are not qualified valuers and an appraisal is not a formal valuation, though the SRO may accept one as evidence of value in some situations.

Get the valuation before you commit to anything. It sets the duty, so it sets the cost.

The questions we cannot answer for you

We are a licensed conveyancing practice. In Victoria a conveyancer's licence is issued by the Business Licensing Authority and covers conveyancing work, which is transferring legal title and creating other legal interests in land such as a mortgage or a lease. It does not extend to tax advice or to general legal advice, and we will not pretend otherwise.

So, plainly:

• Capital gains tax. A transfer can trigger a CGT event even where nobody pays anything. Whether it does, and what it costs, turns on things like how long the property was held and who lived in it. That is a question for your accountant, and worth asking before you decide.
• Structuring the transfer to reduce duty or tax. Not something a conveyancer can advise on. A property lawyer or a tax adviser can.
• Wills, estate planning and whether gifting now is a good idea. See a solicitor.
• Pension and Centrelink consequences of gifting. Ask Services Australia or a financial adviser before the transfer, not afterwards.

None of that is us passing the buck. Getting the wrong advice on a $700,000 asset is expensive, and knowing where the line sits is part of the job.

How a family transfer actually runs

1. Work out which exemption, if any, applies to your situation. This determines everything that follows.
2. Organise the valuation if the transfer is not exempt, or if the SRO will want value evidence regardless.
3. All parties complete the Digital Duties Form. Everyone on both sides of the transfer has to do their part before it can be lodged.
4. Prepare the statutory declaration where the exemption needs one, such as a relationship breakdown transfer.
5. Sort out the mortgage. A discharge, a new loan, or the lender's consent to the change, depending on what you are doing.
6. Settle electronically and have the new ownership recorded on title.
7. Notify council and the water authority so the rates and accounts follow the new owner.

Most of the delay sits at steps two and five. The paperwork is rarely the slow part.

Our ownership transfers page sets out what the work involves, and we cover the whole corridor from the Cranbourne office.

Common questions

Do we pay stamp duty if we give the house to our son for nothing?

Yes, in almost every case. Duty is assessed on the market value of the property, not on what your son pays you, so a gift is treated the same as a sale at full price. There is no parent to child exemption in Victoria outside the family farm rules for primary production land.

Can I add my partner to the title of my investment property without paying duty?

No. The spouse and partner exemption only applies to residential property that one of you lives in as your principal place of residence. On an investment property you would pay duty on the market value of the share being transferred.

Do we need a court order to transfer the house after separating?

Not for the duty exemption. The SRO requires a statutory declaration confirming the transfer is being made solely because of the relationship breakdown, along with the usual duties form. Whether you should have orders or an agreement in place for other reasons is a question for a family lawyer.

Does a family transfer need a contract of sale?

Usually not, because a gift or a related party transfer is generally not a sale. What you do need is the transfer instrument, the completed duties form, evidence of value and any supporting declarations. We will confirm what your particular transfer requires once we know the circumstances.

Talk it through with us first

Family transfers go wrong when the decision gets made at a kitchen table and the duty bill turns up later. A short conversation at the start usually sorts out whether an exemption applies and what evidence you will need.

We are at Office 4, Level 1, 105A High Street in Cranbourne, and because Victorian conveyancing runs electronically we can act for you anywhere in the state. Ask us for a quote or just get in touch and tell us what you are trying to do. We will tell you straight whether it is simple or whether it needs someone else in the room.

This article is general information about Victorian conveyancing and is not legal advice for your particular transaction. Speak to us about your specific circumstances.