Transferring property to a family member in NSW

Transfer duty is usually paid on market value

Transfer duty applies to a gift of land, not only a sale.

Duty is worked out on the higher of the price paid and the market value of the property.

So a transfer to your son or daughter for one dollar can attract duty as if it were sold at full value.

The person receiving the property pays the duty, not the person giving it.

Duty is due within three months of the contract, or of the transfer if there is no contract. If settlement happens first, duty must be paid by settlement.

Exemptions that can apply

Some family transfers are exempt from duty. Each has strict conditions.

1. Spouses and de facto partners. A transfer between spouses or de facto partners can be exempt where the property is their principal place of residence, and after the transfer they own it in equal shares. De facto partners must have lived together for at least two continuous years before the transfer. Investment properties and holiday homes do not qualify.
2. Relationship breakdown. A transfer made as part of a property settlement after separation can be exempt, where the settlement is made by court orders, a binding financial agreement, or another agreement the law recognises.
3. Deceased estates. Transfers to beneficiaries under a will or on intestacy have their own exemption.

The exemption is not automatic. A solicitor or conveyancer must apply for it with Revenue NSW, with the right forms and evidence.

There is no general exemption for a gift from a parent to a child.

Capital gains tax

If the property is not your main residence, a transfer can trigger capital gains tax for the person giving it.

Where you transfer property to family for less than it is worth, the Australian Taxation Office treats you as having received its market value. This is called the market value substitution rule.

Example from the ATO: a parent sells a rental property to a child for the mortgage balance. The tax is worked out on the property's full market value, not the price paid.

If the property was your main residence, the main residence exemption may apply.

Get a formal valuation and speak to your accountant before the transfer.

Centrelink and the gifting rules

If you receive a pension or another Centrelink payment, giving away an asset, or selling it for less than it is worth, may still count in your income and assets tests.

Ask Services Australia or a financial adviser how the transfer will affect your payment before you sign.

The steps in a family transfer

1. Get advice on duty, capital gains tax and Centrelink before you agree on a price.
2. Obtain a market valuation from a registered valuer.
3. Check the mortgage. If the property is mortgaged, speak to the lender first. The mortgage terms decide what consent or refinance is needed.
4. Prepare a contract for sale or a deed of gift, and a transfer.
5. Apply for any exemption, or pay the duty with Revenue NSW.
6. Register the transfer with NSW Land Registry Services.
7. Update insurance, council rates and water rates.

Common questions