What is stamp duty?
Stamp duty is a form of government tax that applies to certain transactions. Parties may have to pay stamp duty when, for example, they buy a property, or if ownership of property is transferred to a party. In NSW, stamp duty is also called ‘transfer duty.’
Property settlement is the division of assets and financial resources that follows after a separation between two parties. Parties adjusting their property settlement by transfer of real or other investment property is dealt with by Section 79 of the Family Law Act 1975.
Traditionally, this transfer of real property entails payment of stamp duty. However, separated couples can be exempted from having to pay stamp duty on property settlement.
While property settlement includes many other assets such as superannuation, in this article, we focus solely on real property or real estate as part of property settlement.
Is stamp duty payable on a property settlement?
Section 163B of the Duties Act 1997 (NSW) states that there is an exemption on stamp duty in case of breakdown of marriage or de facto relationship.
When, in a family law a property settlement, one party transfers ownership of real property to their former spouse or de facto partner, the party receiving property through the transfer of ownership is not required to pay stamp duty. If you are eligible for an exemption on this transfer duty you can potentially save thousands of dollars.
Parties seeking this exemption must ensure that the transfer of property is in accordance with a court order, or a binding financial agreement (BFA). Courts make court orders according to the Family Law Act (1975) or parties make the BFA.
Including transfer of property in a binding financial agreement
A BFA (also known as a prenup)is a binding agreement made between two parties setting out how parties have agreed to divide matrimonial property after a marriage or de facto relationship ends.
Where parties cannot make binding financial agreements, they can approach the Federal Circuit and Family Court of Australia (FCFCOA) for financial orders. If the FCFCOA orders a transfer of property, the stamp duty exemption on property settlement applies.
How do I get the exemption on stamp duty?
Steps for exemption of stamp duty in a family law property settlement in NSW:
Firstly, parties looking to waive their stamp duty obligations must get a copy of their sealed court order or signed BFA which clearly states that one party is to transfer property to their former spouse or partner.
In NSW, parties must engage a solicitor or conveyancer who subscribes to an online property exchange network such as PEXA to effect a transfer. They will need the following documents:
- A copy of proof of identity documents;
- a copy of the transfer from the eConveyancing workspace;
- a downloaded and completed ‘Purchaser/transferee declaration form’ from the Revenue NSW website;
- a downloaded and completed ‘exemption or refund – breakup of a marriage or de facto relationship’ form from the Revenue NSW website;
If the solicitor or conveyancer is registered for Electronic Duties Returns they can process the exemption from duty in-house. Otherwise, they must send the completed documents to Revenue NSW for them to register the exemption from duty. Revenue NSW will send them a Duties Notice of Assessment and a Duties Statement bearing a duties assessment number. The solicitor or conveyancer enters the number in the PEXA workspace to obtain the exemption from duty.
What now?
After the breakdown of a relationship, parties have to be aware of their obligations and to finalise many matters including property settlement.
Family lawyers are experts in dealing with the legal procedures following a separation. They can explain requirements for stamp duty exemptions, draft BFAs, and apply for parenting or financial orders from the FCFCOA. When dealing with transfer of real property as part of family law property settlements, you should also seek advice from solicitors familiar with conveyancing.
If you think we may be able to assist you in a family law and conveyancing matter, call us for a free initial consultation.
