Stamp Duty after separation
When you are going through a separation, there are often significant decisions to make about your home, investment properties and other real estate. One issue that can easily be overlooked when negotiating your property settlement is stamp duty.
Depending on your circumstances, you may be required to pay stamp duty when your interest in a property changes. However, both the ACT and NSW provide stamp duty relief in certain circumstances where property interests are being changed as a result of a relationship breakdown.
Understanding whether you qualify for this relief — and making sure the necessary requirements are met — can make a significant difference to the overall cost of your property settlement.
When might stamp duty apply to your property settlement?
Stamp duty is generally payable when you acquire an interest in real property. The amount payable depends on a number of factors, including the value of the interest being acquired and the jurisdiction in which the property is located.
As part of your property settlement, you may agree to:
- transfer a jointly owned property into one party's sole name;
- acquire your former spouse or partner's interest in a property;
- relinquish your interest in a property; or
- sell a jointly owned property and divide the proceeds.
These changes to property ownership can have stamp duty implications. Importantly, however, stamp duty relief may be available where the change in ownership occurs because of the breakdown of your relationship.
The requirements for accessing this relief differ between the ACT and NSW.
ACT stamp duty relief after separation
If you are separating in the ACT, an exemption from stamp duty may be available when you acquire an interest in property as a result of the breakdown of your relationship.
For example, if you jointly own your home with your former spouse or partner and, as part of your property settlement, you acquire their interest so that the property is transferred into your sole name, you may be eligible for a stamp duty exemption.
Your property settlement needs to be formally documented
One of the important requirements in the ACT is that the agreement providing for the transfer must be formalised before the transfer occurs.
This can generally be done through:
- Orders of the Federal Circuit and Family Court of Australia
- a Binding Financial Agreement
- a Domestic Relationship Agreement.
If you and your former partner choose to divide your property informally, without formalising the agreement in one of these ways, you may not be eligible for the stamp duty exemption.
This is an important consideration when deciding how to document your property settlement.
Buying another property after separation
The ACT also provides a stamp duty concession in certain circumstances where you have had to relinquish your interest in real property because of the breakdown of your relationship and subsequently purchase another property in the ACT.
This may be particularly relevant if you are selling the former family home and purchasing a new home following separation.
There are, however, specific eligibility requirements that must be satisfied.
For example, the relevant agreement or Court Orders must be in place before you relinquish your interest in the property. The timing of these documents can therefore be critical.
For example, if Court Orders provide for the sale of your property, those Orders generally need to be made before the Contract for Sale is exchanged. If the Orders are made after the contract has been exchanged, you may not be eligible for the concession when purchasing your next property.
The ACT Revenue Office applies strict requirements to these concessions, so it is important to obtain advice before taking steps to sell or purchase property.
Other ACT eligibility requirements
There are also other requirements that may affect whether you qualify for the concession, including:
- Residency requirements: you must generally reside in the new property for at least 12 months within 12 months of settlement.
- Income thresholds: an income threshold applies and is reviewed each financial year.
- Purchase price thresholds: there is also a purchase price threshold and a limit on the amount of concession available, which may change from year to year.
If you are considering purchasing a new home after separation, it is important to check whether you satisfy the requirements at the time of purchase.
NSW stamp duty relief after separation
If your property is located in NSW, different rules apply.
NSW provides stamp duty relief in certain circumstances where you acquire an interest in property as a result of a relationship breakdown.
For example, if a property is jointly owned by you and your former spouse or partner and, as part of your property settlement, it is transferred into your sole name, you may be eligible for stamp duty relief.
The transfer must generally be supported by appropriate documentation, such as:
- Orders of the Federal Circuit and Family Court of Australia
- a Binding Financial Agreement
- a general agreement made for the purpose of dividing matrimonial property.
The evidentiary requirements in NSW are generally less onerous than those in the ACT. However, eligibility is assessed by Revenue NSW on a case-by-case basis, so it is important to ensure that your documentation clearly establishes that the transfer is occurring as part of the division of property following the breakdown of the relationship.
What if you are selling the property and buying another home?
A key difference between NSW and the ACT is what happens when you relinquish your interest in a property and subsequently purchase another property.
Unlike the ACT, NSW does not currently provide a corresponding stamp duty exemption for a person who relinquishes their interest in property because of a relationship breakdown and then purchases another property in NSW.
This means that if you are selling the former family home and planning to purchase another property after separation, you should consider the potential stamp duty implications before entering into your property settlement or purchasing the new property.
Why stamp duty should be considered as part of your property settlement
Stamp duty can represent a significant cost and should not be treated as an issue to consider after your property settlement has been finalised.
For example, if one party is retaining the family home, the value of that property and any potential stamp duty liability may need to be considered when determining whether the proposed division of assets is fair.
Similarly, if you are selling the family home and purchasing another property, understanding whether you qualify for any available concession may affect your financial position following separation.
There can also be unintended consequences if the timing or documentation of your property settlement does not satisfy the relevant stamp duty requirements.
Get advice before transferring or selling property
If you are separating and your property settlement involves transferring, selling or purchasing real property, it is important to obtain advice about the potential stamp duty consequences before taking action.
The requirements for stamp duty relief differ between the ACT and NSW, and in some circumstances the timing of your Court Orders, agreement, property transfer or sale can determine whether you qualify for relief.
Obtaining advice early can help you understand your options, avoid unexpected costs and ensure that your property settlement is structured in a way that takes any available stamp duty relief into account.
If you are negotiating a property settlement involving real property in the ACT or NSW, our family law team can advise you about the potential stamp duty implications and the steps you may need to take to protect your position.