Related Party Transfers
Transferring Property Ownership to a Related Party
Related party transfers can be an efficient and cost-effective way of transferring ownership of a property. Whilst this is a common way to transfer property between relatives and friends, it is important that a transfer of property between related parties is handled properly so issues do not arise down the track.
What is a related party transfer?
A related party transfer refers to the process of transferring a property or a part share of a property to a related party. Related parties include spouses, family members or people in a business or personal relationship.
The dealing is not considered an “arms length” transaction, meaning the parties are in a pre-existing relationship and they benefit from the nature of the transaction differently to an “arms length” transaction, such as receiving a property as a gift.
Examples of related party transfers include:
- Transfers between spouses where one spouse is added on title.
- Refinancing where a change of ownership between related parties is required to obtain finance.
- Property settlement due to a divorce or de facto separation.
- Transfers between family members as a gift or below market value.
- Deceased estates where a property is transferred to a beneficiary.
- Transfers between a trust or company to a personal name for taxation purposes.
Is a Contract for Sale required in a related party transaction?
In some cases, a Contract for Sale may not be required and a Transfer document is sufficient. For example, if ownership of a property is to be transferred subject to a court order, a Transfer document is enough. If a transfer of property between related parties can be done without the need for a Contract for Sale, this can save money and time for all parties involved.
For tailored legal advice on any related party transfers, our experienced Property and Conveyancing Lawyers are here to help. Give us a call on 02 9262 4003 to discuss the best options available for your situation or submit an online enquiry.
Considerations when making a related party transfer
There are a few things to consider before proceeding with a related party transfer, including:
- Stamp duty – related party transfers are liable for stamp duty. Stamp duty is payable even if the property is being acquired as a gift, unless an exemption or concession applies.
- Mortgage – if there is an existing mortgage on title, the mortgagee will need to be notified of the proposed transaction and a discharge of mortgage and/or a refinance will be required.
- Tax – there may also be tax implications, such as capital gains tax and GST, that may arise from the related party transaction. Advice should be sought from your accountant or tax advisor in this regard before proceeding with the related party transfer.
- Costs – the costs associated with stamp duty, bank fees, lawyer’s fees, title registration fees and lodgement fees should also be taken into account.
Determining the correct stamp duty payable (if any) is crucial in a related party transaction. If a property is being transferred as a gift or below market value, a valuation report from a registered property valuer is required so that stamp duty is paid based on the share obtained (whether as a whole or in part) and on the market value of the property noted in the valuation report.
A number of related party transactions may qualify for a stamp duty exemption or concession. Information on exemptions and concessions for certain related party transactions can be found on the Revenue NSW website:
For advice on stamp duty exemptions or concessions available for your related party transaction or if you are unsure of your stamp duty obligations, our Sydney Property and Conveyancing Lawyers are here to assist. You can get in touch with us here.