By Carlos Turini – Family Law Specialist
There are many good reasons why former spouses should formalise legally their property settlement including that they may be exempted from paying stamp duty which is otherwise payable for the transfer of title to their real property, cars and shares.
They may also be exempted from paying capital gains tax when they sell the home they formerly owned together.
These exemptions normally represent savings of tens of thousands of dollars.
The exemptions will apply to married couples and their children and to partners of a de facto relationship and their children.
From 1 July 2009 the marriage or relationship breakdown rollover is extended to same-sex couples.[1]
The exemptions are available if the parties enter into consent orders or a financial agreement under the Family Law Act 1975.
Stamp Duties exemptions in New South Wales
Part 7 of the Duties Act 1997 (NSW) details the exemptions applicable to the payment of duty for certain transactions including the transfer of title transfer to property between former spouses or between former spouses and their children.
The transfer of the property of a trust to one of the spouses may also be exempted from stamp duty.
Importantly, in order to be entitled to the exemption, the parties must enter into a legal document which is recognised under the Act as appropriate including:
- Orders made under the Family Law Act including consent orders; or
- A financial agreement
The Chief Commissioner of Stamp Duties (NSW) also has the discretion to accept other form of agreements provided that the Commissioner is satisfied that that the agreement was made “for the purpose of dividing matrimonial property as a consequence of the dissolution, annulment or breakdown of the marriage”.
The easiest way to obtain the exemptions is for the parties to enter into consent orders or a financial agreement. Such documents if properly drafted will attract the exemptions without the need for the Commissioner’s discretion in order to be approved.
Stamp Duties exemptions in Australian Capital Territory
Similarly, in the Australian Capital Territory, former spouses may be exempted from paying stamp duty in relation to the transfer of title to their property if made as part of consent orders or a financial agreement under the Family Law Act 1975 (Cth) or the Married Persons Property Act 1986.
Update:
“The Home Buyer Concession Scheme will change from 1 July 2019. No duty will be payable on the purchase of any home if:
- The total gross income of all home buyers and their domestic partners (if any) for the financial year before the transaction date is below $160,000.
To be eligible, all buyers must be at least 18 years old, they must satisfy the HBCS current and previous home ownership test, and at least one buyer must satisfy HBCS residency requirements.”
Capital Gains Tax exemptions
As a general proposition, the sale of assets such as real estate, shares or managed fund investments attracts a tax liability on the capital gain made on the sale. There are some exemptions, for example, on the sale of the matrimonial home.[2]
In relation to family law matters, a party who acquires sole title to the former matrimonial home in his/her own name as part of a formal family law property settlement will normally be exempted from paying capital gains tax when that party sells the property. There are numerous considerations even in that simple scenario including, for example:
(1) Whether the proprietor has continued to use the property as the main residence;
(2) Whether that party used the home also to run his/her business;
(3) The title to the real property was transferred from the party as an individual to an entity such as a trust or a super fund
Other more complex family law scenarios which may attract relief from capital gains tax may relate, for example, to investment properties. If title to an investment property is transferred to one of the parties (rather than an entity) as part of a family law property settlement, that party may be entitled to “roll over “relief or postponement of the capital gains tax liability.
Family lawyers are not normally tax experts and it is important that parties involved in a family law property matter obtain appropriate advice. In addition to obtaining legal advice from a family law expert, it is important to obtain taxation advice from their accountant and or their registered financial adviser[3] about the tax implications of the family law property settlement that they have in mind.
First Home Owners Grants Entitlements and Family Law Property Settlements
In addition, in some circumstances there are concessions offered in the ACT to persons who previously received a First Home Owners Grant but have since transferred title to the property as a result of a family law property settlement – See: ACT Government Concession scheme
For more information or to make and appointment in either our Canberra or Queanbeyan office please contact: Carlos Turini 
e: cturini@elringtons.com.au | p: 02 6206 1300
[1] 1. Marriage or relationship breakdown and transferring of assets – https://www.ato.gov.au/general/capital-gains-tax/relationship-breakdown/agreements-the-rollover-applies-to/
[2] There are numerous considerations regarding such exemptions including, for example, whether the property was being used also to operate a business.
[3] Registered with the Taxation Practitioner Board.
