Tax implications of family law property division – part 2

Today we are continuing on with our look at the tax implications of property division.  Last time I looked at one of the more commonly thought of ones: capital gains tax.

Today I am looking at stamp duty.

In NSW a duty – a tax by any other name – is payable by the purchaser on the purchase of a property. It is also payable by the recipient on the transfer of property – including where no money is actually paid for the transfer.  It also applies to other assets – such as motor vehicles and shares.

However, the Duties Act provides an exemptions for separating couples when, say, one spouse transfers their interest in an investment property to the other spouse.

This 'marriage, de facto or domestic relationship break-ups' concession means that no duty is payable when the transfer of matrimonial/relationship property occurs under a Court Order or an Agreement in accordance with the Family Law Act.

This sounds like a relatively simple concept but a number of issues can arise:

  • Is the asset being transferred held in NSW?
  • Who legally owns the asset – is it the couple or is it through an interest they have in a company or Trust?
  • Does the Court Order and Agreement properly set out the Transfer? Especially relevant if there are third parties involved.        

These are not always simple questions and proper legal and tax advice is vital to ensure duty is not owed.

Next time: income tax ramifications of property division.