September 20, 2017

Professionals | QLD

We are often asked how property owned by couples (or the individuals forming a couple) should be held. It is not an easy question as there can be:

  • property which is acquired by the couple during the course of the relationship; or
  • property which was held by one party before the relationship began.

Some issues for the holding of such property include family law risks, duty risks for transferring interests in such property and also asset protection risks.

From a duty perspective, when dealing with property that fits within one of these groups, exemptions may apply which can make the dealing with the property (or properties) more cost-efficient. Care does need to be taken to ensure that any dealings meet the strict statutory requirements for the exemptions to apply.

The exemptions may apply to married, de facto couples and registered couples.

TRANSFER OF PROPERTY HELD BY ONE PARTY TO BE HELD JOINTLY BY THE PARTIES

If one party to a relationship solely holds the title to a property (whether because it was acquired prior to the relationship or during the relationship) and that party wishes to transfer an interest in the property to the other party to the relationship, a transfer duty exemption may apply.

This is dependent on the satisfaction of a number of conditions including:

  • the transfer must be between husband and wife, or de facto spouses who live together for two years or persons living together in registered relationships;
  • the transfer is completed by way of gift; and
  • after the transfer the interest in the property, the property will be held by the parties as tenants in common in equal shares or as joint tenants.

Also, the property being transferred must be residential land:

  • on which the couple’s principal place of residence is located;
  • that the couple intend to build their principal place of residence on;
  • on which the couple are building their principal place of residence; or
  • in which the couple have shares that allow them the right to occupy the property as their principal place of residence.

Of note, transferring property by way of gift is not as simple as it seems. Whilst there may be no money changing hands, there may be an assumption of a liability/debt which could mean that the transfer is not by way of gift.

Whilst this exemption works to transfer an interest in a property which is held by one party solely, it does not apply to the transfer of a property which is held as joint tenants or tenants in common so that one party to the relationship becomes the sole holder of that property.

TRANSFER OF PROPERTY UPON A RELATIONSHIP BREAKDOWN

When dealing with the property of a relationship upon its breakdown it is important to be aware of possible transfer duty implications when dealing with the property of the relationship.

Dealings with property may be agreed between the parties informally, in a formal agreement or pursuant to a court order.

Transfer duty exemptions may be available under the Act as well as the Family Law Act 1975 (Cth) (FLA) so it is important that the right exemption is sought and that the appropriate conditions are satisfied.

The availability of duty exemptions for transactions following a relationship breakdown (besides those which fall within the narrow ambit of matrimonial or de facto instruments in the Act) relies on the exercise of an administrative discretion by the Commissioner.

The exemptions under the FLA are much broader but still need to be carefully considered to ensure that unplanned and unexpected duty consequences do not arise.

KEY TAKEAWAYS

Duty can represent a significant cost in transactions. As such, it is important to be aware of the exemptions available and also the conditions for those exemptions to apply.

McInnes Wilson Lawyers is able to provide you with advice regarding transfers to a spouse as well as the tax consequences of transactions which may arise because of relationship breakdowns.

Our Family Law team can also assist with the property settlements, binding financial agreements, child matters and all other family-related issues which arise from the formation or breakdown of a relationship.

If you require further information regarding any of the above mentioned material or wish to enquire about our services, please contact Taryn Hartley.