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Do you have to pay capital gains tax on property transfers in financial agreements?

If my husband and I separate and the house is transferred to one of us do we have to pay capital gains tax or transfer fees and the like?

Answer: Section 90L of the Family Law Act provides that Binding Financial Agreements are exempt of any charge or duty under any law of a state or territory or any law of the Commonwealth.  This means a general Stamp Duty exemption exists on property transferred between spouse partners.

Relief from Capital Gains Tax is also available on transactions that are the result of relationship breakdown.  The CGT that would otherwise be payable in regards to a transaction made as part of a property settlement is, in effect deferred, or rolled over .  This means that capital gain liability will not arise unless and until the property is sold or dealt with at a later date by the party receiving that property.

The capital gain liability will be calculated from the rise in value of the property from the original purchase date (not the date it was transferred following relationship breakdown).

Therefore whilst CGT will not be triggered and payable as a result of a Transfer of Property from party to another arising from a Separation, it does not mean it is not continuing to accrue, and may at some point in the future be payable on a subsequent Transfer. Specific advice should be sought in this regard.

Some parties may wish to make an adjustment to allow a Capital Gains Tax component when finalising a property settlement, to take into account the eventual CGT that will be payable on the property.

In order to secure this exemption, there must be formal documentation, such as a Binding Financial Agreement or Court Orders, which specifically deals with how to transfer property after separation or the divorce. You will need to provide this document to the Office of State Revenue in order to secure the exemption, along with an exemption form.

You should check with the Office of State Revenue about the specific requirements in your State. Nominal fees will then apply (e.g. $2.00) depending on your State. Registration fees may also apply to file the necessary forms with the Lands Registry in the vicinity of $60.00. Apart from that, the Act specifically exempts transactions from tax and stamp duty.

 

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