Stamp duty on the transfer of matrimonial property
I received a telephone call not so long ago from a man who had recently separated. The separation between him (Benny) and his former partner (Frida) had been amicable and they thought, rather than involving lawyers, they would handle the matter themselves. Benny and Frida owned two properties, both held in their joint names. One property located in Cairns was their primary place of residence and the other property, an investment unit was located at Noosa. Both were worth more than $500,000 each.
They had decided that Benny would retain the Noosa investment unit and Frida would retain the Cairns property where she had decided to live. Benny was moving to Noosa to live the high life and compete in triathlons. They thought that the simplest way to handle things was to transfer the other’s half share to each other, without a formal written agreement or Court Order. Pretty simple, so they thought, as each of them, would keep everything else they had in their own name, such as cars, superannuation, furniture and personal belongings.
When Benny telephoned our office, he wanted to find out whether we would prepare the transfer documents and attend settlement for him. Benny also wanted to know how much stamp duty he would have to pay to order to transfer the Noosa investment unit into his name only and how much stamp duty Frida would have to pay to transfer the Cairns property into her name only. Benny explained that he and Frida were trying to avoid any angst between them and thought it would be cheaper if they sold the property shares to each other, without engaging solicitors to act for them.
“An exemption applies to separating couples transferring property between themselves…”
Total stamp duty for the transfer of both properties would have exceeded $27,000, plus Benny and Frida would still have to pay the legal fees for the conveyances. What Benny and Frida didn’t realise, was by embarking down this track of taking care of property matters themselves, that stamp duty alone on the transfer of the two properties was likely to be significantly higher that the costs of engaging two independent solicitors to prepare their Family Court documentation. An exemption applies to separating couples transferring property between themselves pursuant to a Family Court Order or written agreement, so there would have been no stamp duty to pay.
Benny and Frida are like many separating couples who have reached an amicable agreement on how their property is to be divided between them. The split is amicable, however neither is armed with the knowledge on how best to move forward. They didn’t know that stamp duty exemptions apply when properties are transferred pursuant to the Family Law Act (Cth) 1975. There is another reason why settling a family law or defacto matter under the Family Law Act is so important, which is that once a written agreement is entered into or court orders obtained, it generally means that financial matters have been finalised once and for all. There are also rollover provisions relating to Capital Gains as well.
So, for all those who have separated or are considering separation, it is imperative that you speak to your family lawyer and obtain his or her advice regarding not only the transfer of property, but a myriad of other issues that may be relevant to your circumstances, such as updating your will and enduring power of attorney that should be done at the same time. You may spend two hours with your lawyer explaining things, but it may save you a lot of time, heartache and money later.