Tax Tip 102: Transfers Between Spouses and Stamp Duty in the ACT

Transfers of Land Between Spouses and Stamp Duty in the Australian Capital Territory


This is a brief summary involving transfers of land between someone to his or her ‘partner’ for situations that don't involve the breakdown of that relationship (excluding family law related transfers).


‘Partner’ for this means (s72):
Note The dictionary defines partner as a person's spouse or someone with whom the person has a domestic relationship. Domestic relationship is defined in the dictionary to have the same meaning as in the Domestic Relationships Act 1994, s 3.


Summary
For ACT land transfer duty will be just $20 where all the following apply:
· The parties to the transfer are either married, in a domestic relationship, and
· One of the parties is transferring to the other, and
· Both parties will end up owning the land as either joint tenants or tenants in common 50/50 or tenants in common in unequal shares that a proportionate to contributions, and
· The residence the principal residence of the parties at the time of transfer.


Relevant Legislation
Section 72 Duties Act 1999 (ACT)
DUTIES ACT 1999 - SECT 72 Transfer to partner of interest in principal place of residence


Going from one name to both names possible?
Yes, the principal place of residence, at the time of transfer, will result in just $20 duty if the transfer results in the property being held as

(a) joint tenants; or
(b) tenants in common in equal shares; or
(c) tenants in common in shares that are proportionate to the contributions of the partners towards the purchase and improvement of the property; or
(d) tenants in common in shares that are in proportions prescribed by regulation.



Investment Property?
No concession available for a property that is an investment property at the time of the transfer.


Transfer from one name to the other name possible?
No it is not possible to get the concession where only 1 party will be the final owner. Both parties must be the final owners.


Consideration?
There is no requirement for the transfer to be a gift. A transfer at full consideration can still be liable for just $20 duty.


Tax Issues
Advice should be sought on transferring the interest for full market value so that any future renting of the property can result in the loan interest associated with the purchase of the property to be deductible.

Transfer of title is a CGT event with the transferee (the one transferring) being the one to pay the CGT unless an exemption, such as the main residence exemption, applies.


Lending Issues
Any change in title will mean the mortgage has to be discharged and a new loan applied for under the new owners names. Where both parties are borrowers originally there must still be a discharge of mortgage because title will change from one name to two. This will probably result in a need for the lender to requalify borrowers again.


See your lawyer before attempting this as many side issues are involved.


For the situation in NSW See Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW


For the situation in QLD see Tax Tip 101: Transfers Between Spouses and Stamp Duty in QLD Tax Tip 68: Transfers Between Spouses and Stamp Duty in NSW

 

Good one Terry.

I did this last year using the "Domestic relationship" clause. Solicitor drew up the wording and it went through fine.
My tfr and exemption though was from two names down to one, and was "for love and affection" - perhaps you could note that it is possible to go from two to one as well?

 

Thanks for your comments Mcarthur. However I cannot find any legislation which would exempt duty on the transfer from 2 names to 1 name for land in the ACT.

Perhaps this was done under s56. Did you pay the consideration for the purchase in full and argue your wife was the aparent purchser and you the real purchaser?
DUTIES ACT 1999 - SECT 56 Property vested in apparent purchaser

 

Incidently here is a link to s3 of the Domestic Relationships Act 1994 (ACT) which defines 'domestic relationship':
DOMESTIC RELATIONSHIPS ACT 1994 - SECT 3 Meaning of domestic relationship

 

Have you completed one for Victoria? I would like to transfer my house over to my husband in a few years time.

 

Next on the list.

 

Excellent question - no idea sorry!
Essentially we provided a BFA to explain the situation and attached this to the Transfer by Direction form. On the form we then used the "love and affection" wording in the "consideration" part of the form. The stamp duty was not applied (waived? no idea of the wording sorry). I've done a search and can't find it either, apart from the notation on the form.

 

Thanks mcarthur.

BFA means Binding Financial Agreement usually. If this is the case was it done on the break down of a relationship?

That would be done under s74B
DUTIES ACT 1999 - SECT 74B Transfers relating to certain personal relationships

 

Perfect catch Terry - I did it under clause 4 of that section.

And relooking at your original wording, I see this doesn't fit under that either as you've specified this is not for a breakdown of a relationship. So I'll withdraw and crawl away ...

 

I think all states offer duty concessions on the break down of a relationship. But with these series of tips I am focusing on spouses transferring between each out during intact relationships - mainly as a tax and estate planning strategy.

 

Hi all

How does this apply when a spouse is being added to the mortgage (and likely also the title) due to a new loan application for a knock down on an existing block.

For example:

Property is in ACT. Purchased in Jack's name only for $600k in 2014, now worth 1.2m in 2024. The house was rented out for one year after Jack purchased it. So it has been Jack's PPOR for 9 out of the 10 years, so 90% exempt.

• Tax owed on any sale would be expected to be 600k / 10 = 60k, less 50% discount, 30k. Tax rate of 39% = $11.7k.

​

Jack and Jill (wife) want to knock down and rebuild on the block. The broker said Jack and Jill can borrow 1m for the knock down rebuild.

1. Do banks usually want to see Jill on the title before they approve the construction loan?
2. If Jack tries to add Jill to the title, would this trigger a CGT event for Jack?
   • If yes, would this require a valuation be done at the time of the new loan approval?

Is it a tax lawyer who is best placed to provide advice on this matter?

Thank you

Edit: just saw this : Tax Tip 371: CGT on Changes in Ownership between Spouses

My understanding is that 50% of the property would incur CGT if a new spouse was added to the title. So my above calculations, but halved.

 

Being a pedant, you cannot own land in the ACT, merely lease it.

 

You seem to be conflating 'mortgage' with 'loan'. 2 different things. Only a legal owner could give a registered mortgage which is security for a loan.

Does it matter what they want? What do you want? It is possible to have a spouse on the loan or give a guarantee without being on title. Some lenders don't like this for the main residence, but as it is an existing property it should be possible.

Merely adding a name to title won't trigger CGT if there is no change in beneficial ownership, but it will if beneficial ownership changes.

No a valuation couldn't be used as it was previously income producing.

probably as the stamp duty and other legal issues need to be considered - things a tax agent couldn't advise on. If you just want to know the CGT a tax agent would be cheaper generally.

what about the 3rd element cost base expenses while you were living there?

 

Great points, as always, thank you Terry

 

If a Stamp Duty is applicable would that be based on the original purchase price or Market Value at the time of transfer ? If its Market Value (would Professional Valuation be required?)

 

value as of the date of the transfer. And if related party transfer the Revenue authority will likely require a valuation done.

 

Yes true, but you buy the lease basically

 

Its a "interest" in tax speak. Often called ownership as a common expression using its common meaning. ie To own is not same as legal ownership in all cases either