Transferring property between family members is certainly less complex than selling or buying from non-relations. Although you may not have to write a contract of sale, the process is still governed by regulations and laws—which can be complex.
If you’re contemplating transferring property titles, you need to be familiar with the entire process. You’ll have to learn and adhere to the relevant legislation and property titles transfer processes. Then there are the other risks involved, which you have to minimise.
To add to the complication, there are various types of property title transfer.The two most common ways are selling and gifting. There’s a third option that neither involves changing property ownership without gifting or selling.
You need to be conversant with the various ways of transferring ownership to avoid hefty transfer fees. Whereas the government traditionally imposes specific fees on each transfer, you could be exempted. You may have to pay capital gains tax and stamp duty to transfer property titles in some instances. However, the government may pardon you from these taxes under certain circumstances.
Rather than risk making a costly mistake, you’re best off seeking the services of a qualified and registered conveyancer.
A conveyancer will:
- Provide the necessary information about the transfer
- Manage legal documents and processes
- Provide legal advice so you can avoid costly errors
How do you transfer property between family members? Let’s find out.
Method 1: Transfer of Property Title by Gifting
Gifting property to a family member is a straightforward process. However, it requires paperwork and some fees.
Even if you aren’t receiving any payments for the property, the government recognises it as a legal process. That’s why it requires that your transaction be registered and supported by government-issued documentation.
In essence, that means you can’t just gift property to your family members without legal documentation. The documentation will make this transfer legally binding. What are the steps involved?
Step 1: Begin by Determining Your Property’s Market Value
You should begin this gifting process by determining your property’s market value.
For this stage, you need the services of a professional valuer. Your lawyer can help you find a professional valuer.
Whether you’re receiving money for your investment property or not, you still have to pay stamp duty. The government calculates the stamp duty from the exact value indicated in the professional valuer’s report.
Step 2: Prepare the Deed of Value
Your conveyancer will also likely suggest that you (the donor) and the recipient sign a Deed of Gift. The Deed of Gift is essential because:
- It formalises the gifting process by putting it in writing
- It helps to avoid confusion or conflict in future
- It’s the document that notifies the land registry about the nature of the land transfer between family members.
Your lawyer can now approach the land registrar’s office and initiate the legal transfer process. The registrar will use the valuation and Deed of Gift documents to assess stamp duty and registration charges.
The procedure for paying stamp duty is the same for both gifted and sold family property.
Step 3: Complete the Necessary Documentation
The land register will require that you complete Transfer Form 01T and Form 10-0520.
The transfer form is downloadable online. Filling this form allows the government to record the recipient’s legal interests on the land’s title.
Meanwhile, form 10-0520—or the Notice of Transfer of land or Sale of Land—is part of the 1992 conveyancing legislation. The law requires that this form be completed for any transaction involving changes in
- Land ownership
- A lessee of crown land
- Crown land lease
In NSW, the purchaser or recipient of the property must complete the ODA 076 form. Some parties refer to this form as the transferee declaration form.
The information in this form helps determine whether you’re exempt from taxation.
Step 4: Pay Taxes and Fees for Your Investment Property
The government makes tax considerations depending on the nature of the transfer. It imposes the stamp duty tax in any transaction involving land transfers. The amount is paid by the transferee or the recipient of the property.
You should pay stamp duty on the specified date of sale or transfer between family members.
You may also have to pay for administration and documentation costs at the land titles office.
The other required cost is the legal charge. Your lawyer will give you proper advice on how and when to pay these fees.
When you receive gifted property, you may have to pay capital gains tax. However, you can avoid this tax under certain circumstances. These situations include:
- If the donor acquired the property before 20th September 1985, when the capital gains tax was enacted.
- If the recipient has been residing in the family home and has indicated it as their primary residence and address.
Method 2: Transfer of Property title by Selling
You could also decide to transfer your property to your family members by selling it at either a discounted price or for its full market value. In either case, there’s a series of steps to follow when selling property for a successful transfer.
Step 1: Prepare a Contract of Sale
Since this is a legal document, you’ll need your lawyer to help with this process. The procedure applies to all properties located in NSW’s urban areas.
- Title documents
- Updated zoning certificate
- Property exclusions
- Drainage diagrams
- Swimming pool certificate (if applicable)
These requirements may sound excessive, but they shouldn’t worry you. Your conveyancer will easily help you complete the document. Your lawyer will also let you know if you need:
- An identification survey
- A home owner’s warranty insurance certificate
- Building certificates
Step 2: Sign the Contract of Sale
The contract must be signed by the seller, buyer, and witnesses, who in this case will be the lawyers. Remember that all the parties must retain a copy of the signed document. Typically, the seller signs the document first then forwards it to the buyer.
In a traditional sale, the buyer deposits 0.25% of the sale price. However, since this transaction involves family members, you could make a local payment arrangement.
Step 3: Enter the Cooling-Off Period
In NSW, the law gives the buyer five business days to change their mind—termed the cooling-off period. While cooling off, they can cancel the transaction but must forfeit 0.25% of the purchase price.
After this period, the buyer should pay the deposit balance or 10% of the purchase value. It’s important to note that the cooling-off period is meant to benefit the buyer. The seller can’t simply walk away from a contract they have signed.
Step 4: Complete the Land Office Process
The process includes completing the Transfer Form 01T and Form 10-0520. Your lawyer will help you fill these documents. You’ll also have to submit the property’s title of ownership.
Step 5: Pay the Taxes and Transfer Fees
Your property is subject to stamp duty and capital gains tax before the government can transfer between family members.
The government will ask you to pay capital gains tax depending on your property’s capital gain or loss. The taxable amount is related to your income.
It’s vital to remember that its value will depend on the market price, not the contract price.
You could avoid paying taxes if:
- You receive less money than its actual market value
- You don’t transact at arm’s length during the sale process
- The asset is the buyer’s primary residence
- The property was registered before 20th September 1985
Here’s a breakdown of the amounts you may be required to pay. The fees are correct as of September 2023 and are subject to change.
|The LSR service or product
|Transfer (according to section 46 Real Property Act)
|Transfer including covenant (minimum)
|Transfer including easement (minimum)
|Transfer of estate that alters tenancy without changing shares
|Any other property dealing
Method 3: Transfer of Property Title by Changing Ownership
Some special situations may necessitate the transfer between family members without selling or gifting. The situations include:
- Transfer between de facto partners and married couples
- Foreign transferees
- Marriage break-ups
For transfers between de facto and married partners, you don’t have to pay transfer duty. You’re also exempt from tax obligations if the property is vacant land or is the principal family home.
Married partners must have stayed together for at least two years to qualify for an exemption.
Some foreign transferees don’t have to pay land tax. However, they must settle the surcharge purchaser duty, which is 8% of the property’s value.
Following a divorce or break-up, the recipient may be exempted from property taxes. To be eligible for exemption, the property has to be transferred to:
- The partner’s child or children
- Either of the partners
- The child’s trustee
Simplify the Transfer Process With Proper Legal Guidance
Transferring property between family members may sound like a straightforward process. However, when you consider the legal and procedural requirements, it starts getting complicated.
Finding a good conveyancer makes the entire process very simple. With proper legal guidance, you’ll navigate the various functions and successfully transfer the property.