Stamp Duty Exemption: Breakdown of Marriage

Separation can be an emotional time, and it’s often difficult to consider all the intricate details involved when transferring property from former partners. At Haitch Legal, we have extensive experience in property law and can assist you with all your property transactions.

In Victoria, transfers between spouses can occur without paying land transfer duty. In this article from our property law experts, we’ll break down the process in simple terms so you can understand what’s involved in this situation.

 

What Does Spousal Transfer Mean?

A spousal transfer is when ownership of a property is transferred between spouses or domestic partners. This might happen during a divorce, separation, or shared ownership.

Some rules apply, like meeting residency requirements or if a mortgage is involved. For investment properties, stamp duty may still be payable. The amount of stamp duty payable depends on the property‘s value and the applicable duty rate at the time of transfer.

 

4 Questions on Spousal Property Transfers in Victoria

We’ve outlined four key considerations to answer any questions you may have and help you understand the process and requirements for spousal property transfers in Victoria. These points cover important factors like stamp duty exemptions, legal documentation, and eligibility criteria to ensure a smooth transfer.

Do you Pay Stamp Duty When Transferring Property to Your Spouse?

 

1. Do you Pay Stamp Duty When Transferring Property to Your Spouse?

You do not pay stamp duty during spousal property transfers in Victoria, especially if the property is their family home or principal place of residence.

Any property transfer pursuant to a breakdown of marriage, de facto relationship or domestic relationship is exempt from this stamp duty. The transfer can be from both parties to either one of the parties or from one party to the other.

The exemption applies to residential properties, commercial properties, and more. Some further rules can apply, like meeting residency requirements or if a mortgage is involved. Stamp duty may still be payable for investment properties. Additionally, personal property such as furniture or vehicles can also be included in the transfer process, impacting eligibility for stamp duty exemptions.

 

2. Who is Eligible for Stamp Duty Exemption in Victoria?

Victorian legislation lays out the guidelines for eligibility in Section 44(1) of the Duties Act 2000 (Vic). The legislation states that no duty is chargeable in respect of a transfer of dutiable property if it can be satisfied that:

  • The transfer has been made solely because of the breakdown of marriage or domestic relationship, and
  • The transferor is a party (or both parties) to the marriage of a domestic relationship, and
  • The transferee is a party (or both parties) to the marriage or domestic relationship, and
  • No other person takes or is entitled to take an interest in the property under the transfer.

It’s important to check the rules with the State Revenue Office and get advice to make sure you qualify for any duty exemptions. Certain changes in property ownership proportions within family properties may attract stamp duty unless specific conditions are met.

 

What Evidence Do You Need for Property Transfers?

 

3. What Evidence Do You Need for Property Transfers?

The State Revenue Office (SRO) requires an all in one Digital Duties Form to be completed by both parties with all their details to complete the transfer.

As part of this form, the parties will need to specify ‘breakdown of relationship’ as an applicable stamp duty exemption or concession.

The Duties Online Form will need to be signed by all parties to the transaction, and once stamp duty is verified, there will be no requirement to pay stamp duty.

Prior to finalising the transfer, it is advisable that you enter into Consent Orders or a Binding Financial Agreement (BFA) with your former partner. Either of these will document the separation and specify the property settlement. A family lawyer can assist in drafting the Consent Orders or BFA, and you do not need to go to court to obtain a Binding Financial Agreement.

 

4. Does the Stamp Duty Exemption Apply to Trusts or Company Transfers?

The stamp duty exemption is also available where there is a transfer to a trustee of a trust because of a breakdown of marriage or domestic relationship.

Section 44(1) of the Duties Act 2000 (Vic) states that no duty is chargeable in respect of a transfer of dutiable property if it can be satisfied that:

  • The transfer has been made solely because of the breakdown of marriage or domestic relationship
  • The transferor is a trustee of a trust of which a party (or both parties) to the marriage or domestic relationship is a beneficiary (or are beneficiaries), and any list of transferees as listed in Section 44(1)(c)

Subject to some restrictions, transfers from corporations can also qualify for an exemption where the transfer has been made solely as a result of a breakdown of a marriage or domestic partners. The additional requirement that must be met is that the dutiable value of the property being transferred cannot exceed the value of the interest of the parties to the relationship in the corporation.

Section 44(3) of the Duties Act 2000 (Vic) states that no duty is chargeable in respect of a transfer of dutiable property if it can be satisfied that:

  • Again – The transfer has been made solely because of the breakdown of marriage or domestic relationship
  • The transferor is a corporation
  • The dutiable value of the transfer does not exceed the value of the interests of the parties to the marriage or domestic relationship in the corporation.
  • As a result of the transfer, the value of the interests of the parties to the marriage or domestic relationship in the corporation is reduced by the same amount as the dutiable value of the property transferred.

 

Example Situation: Josh and Elizabeth’s Property Transfer

Josh and Elizabeth are getting a divorce and need to divide their assets. Elizabeth owns two investment properties in her name. As part of their Consent Orders, Elizabeth is required to transfer one property to Josh.

 

Example of Property Transfer

Because the transfer occurs solely due to the breakdown of their marriage, it qualifies for a stamp duty exemption under Section 44(1) of the Duties Act 2000 (Vic). Neither Josh nor Elizabeth will need to pay stamp duty on the transfer. This exemption applies as follows:

  1. The transfer is being made because of a relationship breakdown.
  2. Both Josh and Elizabeth are parties to the marriage, and no other person is gaining an interest in the property.

Before the transfer can proceed, Josh and Elizabeth must complete a Digital Duties Form through the State Revenue Office (SRO). Additionally, their Consent Orders formalise the agreement and meet the exemption criteria.

This example shows how spousal property transfers due to a marriage breakdown can be handled cost-effectively with the right legal documentation.

 

Still, Have Questions? Get in Touch

Ensuring all legal documents are correctly prepared and submitted is crucial to avoid any issues during the transfer process, and that’s where we can help. Contact Us for more information on all your legal matters, including the stamp duty exemptions that apply to your situation.

Our Melbourne conveyancing property lawyers can assist in transferring property pursuant to your relationship breakdown so you don’t pay stamp duty.

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview of matters of interest, and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any content.

Liability limited by a scheme approved under Professional Standards Legislation.

Last updated: 29 January 2025 Article by: Halil Gokler

 

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