Do You Pay Stamp Duty on a Property Settlement in NSW?

If you're transferring the family home as part of your property settlement, one of the first questions you'll probably ask is: will I have to pay stamp duty on the transfer?

It is a reasonable concern. Transfer duty, commonly called stamp duty, can be a significant cost when property changes hands.

The good news is that certain property transfers following the breakdown of a marriage, de facto relationship or domestic relationship can be exempt from transfer duty in NSW. However, the exemption only applies if the requirements of the Duties Act 1997 (NSW) are met and the transfer is properly documented.

What is stamp duty and when does it normally apply?

Stamp duty is the common name for transfer duty, which is a NSW government tax that can apply when property is transferred into another person's name.

For example, transfer duty will generally apply when you buy a property. There are, however, exemptions for certain types of transactions.

One of those exemptions can apply where property is transferred following the breakdown of a marriage or relationship as part of a property settlement. This can include the transfer of the family home or other matrimonial or relationship property from joint names into one person's name.

Is a property settlement transfer exempt from stamp duty in NSW?

It can be.

Section 68 of the Duties Act 1997 (NSW) provides exemptions for certain transfers of matrimonial or relationship property following the breakdown of a marriage, de facto relationship or domestic relationship. The exemption is not automatic simply because the parties are separating. The requirements of section 68 must be satisfied.

Generally, the relevant requirements include:

• The marriage, de facto relationship or domestic relationship has broken down irretrievably or, for a domestic relationship, has been terminated.

• The property being transferred is matrimonial property or relationship property.

• The transfer forms part of the property settlement following the breakdown of the relationship.

• The property is transferred to a person permitted by section 68, such as one or both parties, a child of either party, certain trustees for a child, or a trustee in bankruptcy of either party.

The transfer also needs to be supported by appropriate settlement documentation and evidence.

You can read the current Revenue NSW guidance on marriage and relationship breakdowns.

What documents can support the exemption?

There is no single document that is required in every case. Depending on the circumstances, the transfer may be made under or supported by:

• A court order under the Family Law Act 1975 (Cth), including consent orders

• A binding financial agreement under the Family Law Act 1975 (Cth)

• A registered arbitration award under the Family Law Act 1975 (Cth)

• In some circumstances, an agreement that Revenue NSW is satisfied was made for the purpose of dividing matrimonial or relationship property following the breakdown of the relationship

Consent orders are orders made by the Federal Circuit and Family Court of Australia that can formalise an agreement about how property and other financial matters will be dealt with.

A binding financial agreement (BFA) is a legally binding agreement dealing with financial arrangements between parties to a marriage or de facto relationship. BFAs must meet specific legal requirements to be binding.

You can read more about How Much Do Consent Orders Cost in NSW? or learn more about Binding Financial Agreements.

Does the stamp duty exemption apply to de facto relationships?

Yes.

The exemption is not limited to married couples. Section 68 also deals specifically with the breakdown of de facto relationships. The relationship must have broken down irretrievably, the property must be relationship property, and the transfer must form part of the property settlement.

The rules have changed over time. Under the current provisions, Revenue NSW recognises certain agreements made for the purpose of dividing relationship property following the breakdown of a de facto relationship. This means a consent order or BFA is not necessarily the only possible form of supporting documentation.

The rules for domestic relationships are different again, so the evidence required will depend on the type of relationship involved.

What evidence does Revenue NSW ask for?

The exact evidence depends on the circumstances, including whether the relationship was a marriage, de facto relationship or domestic relationship.

Depending on the transaction, Revenue NSW may require the executed transfer, the relevant exemption or refund application, the property settlement documentation and a Purchaser/Transferee Declaration. Proof of identity and evidence of the relationship breakdown may also be required.

Your conveyancer will generally deal with the transfer and the duty requirements. It is important that the documents supporting the property settlement are in place before the transfer is lodged.

You can check the current Revenue NSW evidentiary requirements for section 68 before your transfer is lodged.

What mistakes can cost you the exemption?

One of the biggest risks is transferring the property before the arrangements supporting the property settlement have been properly documented.

For example, if you transfer the property without having the relevant agreement, order or other qualifying documentation in place, you may not satisfy the requirements for the exemption.

It is also important to check who the property is being transferred to. Section 68 specifies the people who can receive the property for the exemption to apply. A transfer to an unrelated third party, such as a sibling or new partner, will generally fall outside the exemption.

This is why it is worth considering the transfer duty consequences while you are finalising your property settlement, rather than treating the property transfer as a separate administrative step afterwards.

How can Wallen Family Law help with your property settlement?

A property settlement is about more than deciding who keeps the family home. The way your agreement is structured and formalised can affect how assets are transferred and whether an exemption from transfer duty is available.

At Wallen Family Law, we help separating couples negotiate and finalise property settlements involving the family home, other properties, investments, businesses, superannuation and debts.

Where appropriate, we can also assist with consent orders or Binding Financial Agreements to formalise your agreement.

If a property is being transferred as part of your settlement, getting advice before the transfer takes place can help you understand the legal requirements and reduce the risk of an unexpected duty liability.

This article provides general information only and should not be relied upon as legal advice. Every family law matter is unique and requires specific legal guidance. Stamp duty and transfer duty rules can change, so you should obtain advice about your particular circumstances before transferring property.