Selling or gifting are the options when it comes to a real estate transfer of property to a family member. Both options carry tax implications, and naturally, you would want the approach that will be less costly for you as well as the family member receiving your asset.
You need to consult a conveyancer to determine your best option. Complex factors on taxation, which are better examined by a professional, are involved when you transfer a property to a family member.
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Can I transfer property to a family member for $1?
Some of the tax considerations to look into when you transfer a property to a family member are the following:
- The state or territory where the property is located
- Whether the property is residential or commercial
- The number of properties the parties involved own
You can sell your property for just $1 to a family member, but that amount paid won’t be the basis for the taxation of the ownership transfer. The taxes due on the sale will not be minimised simply because you sold it for only $1 or discounted heavily to help a family member.
The sale will be assessed a stamp duty based on the market value of your property, not its $1 selling price. A capital gains tax may also be levied on the sale if it involves an investment property or the property is not your main residence.
Any capital gains tax will be computed based on your property’s current market value and your original purchase price.
Steps on a transfer of property by selling
For a successful transfer of property to a family member by selling, the steps to take are the same as traditional real estate sale. These steps are the following:
- Write a contract of sale which would need the following documents:
- The title of the property and its exclusions,
- Updated zoning certificates,
- Drainage diagrams,
- If applicable, a swimming pool certificate
Other documents that may be required are as follows:
- An identification survey
- A home owner’s warranty insurance certificate
- Building certificates
- Sign the sales contract. The seller and the buyer will sign the contract with the lawyer or conveyancer as witnesses. All parties must have a copy of the signed contract, with the seller typically forwarding it to the buyer.
- Go on a cooling-off period. Real estate deals typically include a five-day cooling-off period allowing the contracting parties time for a change of mind. After this period, the buyer should pay the deposit balance or 10% of the purchase price. Since the sale is between family members a local payment can be arranged instead of the deposit.
- Complete the transfer process. As the seller, you have to complete filling up the transfer forms and documents in the Land Office. Your conveyancer will help in filling up these documents for the transfer which also requires that you to submit the property’s title.
- Pay the fees and taxes. The sale to transfer property to a family member is subject to stamp duty and capital gains tax. As mentioned earlier, the contract price will not be the basis of the taxation but its market price.
You, as a seller, can be exempt from the taxes under the following conditions:
- The money you received in the sale of the property is less than its actual market value.
- The property is your primary residence and was registered before September 20, 1985.
Transfer property to a family member as a gift
Taxation is also a major matter to think about when transferring ownership of your property to a family member as a gift or support. Your to-do list for gifting a property are as follows:
- Determine your property’s market value. For this step, ask your lawyer to help you find a professional valuer. Even as you will not receive any money in the transfer of property to a family member, you will still have to pay stamp duty on the gift based on the professional valuer’s report.
- Have a Deed of Gift ready. You, as a donor, and the recipient family member will need to sign a Deed of Gift to formalise the gifting process. This step will help avoid future conflict or confusion.
- Initiate the legal transfer. Your lawyer will submit the property’s valuation and Deed of Gift to the land registrar’s office. The office will use these documents to assess registration charges and stamp duty.
- Complete the transfer forms. You fill up the property’s transfer forms for submission to the land registrar. Downloadable online, these forms will record the ownership and legal interests of the property’s recipient on the asset you gave as a gift.
- Pay the fees and taxes. You or the recipient of the property will pay the taxes on its transfer. These payments include not only the stamp duty tax that is imposed on land transfers but also documentation and administration costs.
The recipient of your gift property can be assessed a capital gains tax. This levy, however, can be avoided as in a sale to transfer a property to a family member under the following conditions:
- The donor acquired the property before the September 20, 1985 enactment of the capital gains tax law.
- The recipient has been living in the property and shown it as a primary residence and address
Transfer property without paying stamp duty
Other exemptions and rules differ in each Australian state and territory when it comes to the tax and fees payable when transferring property to family members.
These exemptions include guidelines on property transfers involving a breakup between spouses or transferring house title to a spouse.
The online resources below offer more to answer the question—Is stamp duty payable on the transfer of property between family members?
New South Wales — Revenue NSW
Victoria — State Revenue Office
Australian Capital Territory — ACT Revenue Office
Queensland — Queensland Government
Northern Territory — Stamp Duty Lodgement Guide
South Australia — Revenue SA
Western Australia — WA Government
Tasmania — State Revenue Office
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