In this article, we explore:
- Can I gift a house to another person in Australia?
- What are the pros and cons of transferring a title to a family member?
- Is stamp duty payable on a property gifted to a family member or friend?
Can I gift a house to another person in Australia?
It is possible to gift a house to a family member, friend or another person in Australia. It is done via the transfer of a property title. Ivan Bezbradica, a lawyer at Victorian-based firm SB Solicitors, said there are many reasons why people may want to transfer property titles, including a parent wanting to pass on an early inheritance; for tax purposes; as a way to protect assets; and as a gift to help a family member or a friend. However, there are several factors that should be considered before doing so, such as stamp duty and tax implications.
“I get an enquiry about transferring titles between family members at least once every other day,” Mr Bezbradica told Canstar. “So it is a common transfer people are looking for. However, once people realise stamp duty generally has to be paid, in most circumstances they won’t move forward.”
Mr Bezbradica said the main groups of people enquiring about transfer property between family members are:
- divorcing couples (which he says is the most common circumstance);
- elderly parents to their children instead of leaving their property in a will;
- couples looking to change ownership shares in investment properties, and
- parents looking to help out their children.
If you are considering gifting property to another person, it could be a wise idea to seek professional advice.
What is a property title?
When you buy, sell or mortgage a property, that change needs to be recorded by the government. A property title is an official record of who owns land, and can include details about any mortgages, covenants, caveats and easements, according to the Australian Government. Each state and territory is responsible for keeping its own central register of titles, which is why the fees and laws around titles and their transfer can often vary between locations. It’s a good idea to check to see what specific laws apply in the location of the property to be transferred.
Mr Bezbradica said traditionally, a property title used to be paper-based but that is no longer the case.
“However, now, with the rollout of electronic conveyancing and databases, it is almost all electronically recorded without a paper version of your title,” he said. “Most states and territories have rolled out electronic titles and conveyancing, with the rest soon to follow. You can still get a paper title if you have a ‘clear’ title – with no outstanding mortgage on the database. If you have a mortgage, your bank most likely holds your title in electronic form.”
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Can I transfer a property title to a family member? Can I gift a property to my children?
The simple answer is yes, you can. Transferring a title between family members is the same process as any other property transfer, Mr Bezbradica said, where one person is taken off the title and another is added on. He said the only difference when transferring to a family member could be in the assessment of stamp duty (see below). However, if there is an existing mortgage over the property, it’s more complex. If the loan is to be transferred, too, the person receiving the home will have to undergo a loan approval process. It could be a wise idea to check with your lending institution before embarking on a title transfer, and also seek professional advice about possible tax and other financial implications.
What are the pros and cons of transferring a title to a family member or a friend?
Mr Bezbradica said it was important for anyone thinking about transferring a property title to consider the effect this could have on their own personal financial situation. For example, he said, there could be implications on the amount of tax you have to pay, such as Capital Gains Tax, or on any pensions you receive from the government. He said there could also be costs involved with the transfer, such as stamp duty. Seeking professional advice could be a wise idea.
Mr Bezbradica said that transferring a property title could be used when considering an “asset protection strategy” against lawsuits. Appropriate legal advice would be required in this instance. He said there could also be possible tax advantages to the arrangement, however, expert advice was needed to take into account personal circumstances.
There could be possible capital gains tax implications involved with transferring a property title, Mr Bezbradica said.
“If a property is gifted or sold for less than its true value, capital gains tax is assessed on the market value (what it would sell for on the open market) of the property, not the money that changed hands,” he said. “For example, if a parent gifts an investment property to a child, they may get an unexpected capital gains bill from the ATO if they didn’t plan this out properly. In these circumstances, I sometimes draft a Deed for clients that states the child will pay for the parents’ capital gains tax, but it varies from case to case.”
Impact on government pensions
“Elderly clients also have to be careful with their pension entitlements,” Mr Bezbradica warned. “If you gift a property to a family member, Centrelink will still count the market value of the property as (the equivalent of) income, even if no money has changed hands. This income will then be added onto your asset test for pension entitlements that may, in turn, reduce the amount of money you can get from the pension, or in some cases it may make you completely ineligible to receive the pension. The same principle applies when selling property for less than market value. If you have a pension, you should check with Centrelink how transferring your property will impact your entitlements before you go ahead with it.”
The Department of Human Services has rules around gifting, which could impact pensions. The government may also consider whether or not you have a “granny flat interest” in the home, which is an arrangement where you transfer the title of your home to someone else but retain the right to live there for life. The Department recommends obtaining legal and financial advice about these matters if you receive a pension.
→ From our friends at Canstar Blue: What is a conveyancer and what do they do?
Is stamp duty payable on a property gifted to a family member or another person?
Stamp duty – sometimes called transfer duty – is a fee that the government charges to make a change to a title. It is typically calculated according to the type and value of the property. Mr Bezbradica said that’s why an official property valuation is usually required prior to any title transfer. However, if you are transferring the title to a family member, an exemption could apply in a limited range of circumstances. Each state and territory has different rules when it comes to stamp duty and exemption, he said, so it could pay to obtain expert advice from someone used to dealing with your state or territory’s laws in this area, such as a local conveyancing solicitor.
→ Canstar has a calculator that can help you estimate the cost of stamp duty in your state or territory.
Can I transfer property without paying stamp duty?
Unfortunately, stamp duty is typically payable in the “vast majority” of property title transfers, Mr Bezbradica said. He said he had many clients who incorrectly assumed they were automatically exempt from paying stamp duty just because they were transferring a property to a relative, but this is usually not true. However, there are some exceptions (discussed below), especially around transferring titles to spouses.
“They believe stamp duty does not need to be paid as they already paid it (when they originally purchased the property) – but this is not the case in the vast majority of circumstances,” he said. “Stamp duty is paid every time ownership changes over a property, except in limited circumstances. And stamp duty is calculated on the market value of the property and not the contract price or gift status.”
Stamp duty exemptions in New South Wales
In New South Wales, there are certain exemptions available. No transfer duty is payable if the transfer is between married couples and de facto partners and the house is your principal place of residence, and you could be exempt from paying it if a domestic relationship breaks up and a title transfer is required. However, stamp duty could be payable in other circumstances, such as if the family home is used for other purposes, such as running a business, or if the owners are living overseas.
Stamp duty exemptions in Victoria
Mr Bezbradica said in Victoria there were limited circumstances where stamp duty exemptions applied, such as “between de facto or married couples for their family home, as part of divorce, a court order, or in circumstances around a deceased estates’.
Stamp duty exemptions in ACT
In the Australian Capital Territory, stamp duty is called “conveyance duty”. It’s typically not payable when a property is transferred as part of a deceased estate, as described in a Will (or similar legal arrangements – check with a solicitor). You may also be exempt if the transfer (of your principal place of residence) is to your partner, or as a result of a court order issued because of a relationship breakup. If a farmer wants to pass land used for primary production on to a younger generation, this transfer may also be exempt from stamp duty.
Stamp duty exemptions in Queensland
In Queensland, stamp duty is payable unless the transfer of title qualifies for an exemption –such as transferring interest in a principal place of residence to a spouse, or if it’s a result of a court order or agreement after a relationship breakup. It’s a good idea to check this with a qualified solicitor or the appropriate government agency before you begin the transfer process.
Stamp duty exemptions in Northern Territory
In the Northern Territory, transfer of property title between family members “generally” attracts stamp duty, unless the transfer qualifies for an exemption, according to the NT Government. However, there is usually no stamp duty payable if the transfer is between married or de facto partners, or is the result of a Binding Financial Agreement or court order after a relationship breakup. An exemption is also available if a farm is being passed between family members, or a family-owned company or trust.
Stamp duty exemptions in South Australia
In South Australia, stamp duty is payable on all title transfers except those deemed to be of “qualifying land”, such as commercial, industrial, recreation and mining land. There is a foreign ownership surcharge payable by overseas residents, of an extra 7% of the value of the property. Exemptions could apply if the transfer involves removing a name from a title due as a result of the death of one of the joint tenants (a co-owner of the property), or due to a “certified domestic partnership agreement”.
Stamp duty exemptions in Western Australia
In WA, stamp duty is payable for transfer of titles to family members, unless an exemption applies. An exemption may be available if you are transferring the property title (of a principal place of residence) between spouses or de facto partners (of two years) when you and your partner are the only joint tenants in equal shares. A “nominal transfer duty” fee of $20 may be payable if the title is transferred as a result of a relationship breakdown; or if it is for a deceased estate transaction and the property is being given to someone under the direction of a will or intestacy. The passing of a family farm to another family member may also be exempt from stamp duty in WA.
Stamp duty exemptions in Tasmania
In Tasmania, there are stamp duty exemptions available “when property is transferred between partners in a marriage, a significant relationship or a caring relationship”, according to State Revenue Office of Tasmania. However, the Office also states: “This exemption does not apply to transactions where property is being transferred from both people in the relationship to one of those persons.” For details of other exemptions, it could be a good idea to consult an expert professional, such as a solicitor.
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