In this blog we discuss everything you need to know about RELATED PARTY TRANSFERS. This is part two of a two part series.
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Hi everybody - George Sourris, Empire Legal.
Today's topic: Related Party Transfer - Part Two.
I want to unpack a very common, yet often not well understood area of property law - transfer duty (stamp duty) exemptions.
Now we see this all the time where we have a husband and wife (or defacto) separating and one person is going to be buying out the other to keep the family home.
Let's do a hypothetical quickly. Let's just say we've got a $1,500,000 property and it's been held jointly between husband and wife or defacto. They split up, one person's buying out the other - transfer duty is applicable here because we've got a dutiable transaction. So the 50% that's being purchased has stamp duty payable on that 50%. Now on a $1,500,000 purchase, we're talking $23,975 as a 50% share of the transfer duty.
It is a significant amount of money though, seriously. So how can we get around this, or help minimize the transfer duty payable? Well, there are two options.
1) We can either have a Family Court Order - so if the Courts seal an order saying that, say the wife is buying out the husband and obtaining the property, then there's no stamp duty payable.
2) A Binding Financial Agreement. So this is where all of the assets are written up amicably between the parties, saying person A gets the car, person B gets the house, etc. If the property being transacted is specifically listed there, similar to the court order, there's an exemption under Section 90 of the Family Law Act, whereby stamp duty is not payable. For further information, please use this link.
So this is great. If you're a broker, you can save your clients lots and lots of money. And on the real estate side, just having that awareness, that significant transfer duty can be saved. We can help with binding financial agreements. We also have partners in family law that we can recommend you to. So if you are experiencing any of this, please do get in touch.
A couple of other very, very quick things to add in there. We're only ever going to act for one party in these types of transactions. So with the related parties, we usually act for the incoming, because there's a bit more work involved. The other person needs to get their own legal representation, but we can guide the clients through that.
Also, a contract of sale is not always required for a related parties transfer. We actually get you to talk to your banker or broker and see what the lender requires - because if they don't need a contract of sale, depending on the situation extra money can be saved there.
We know all about related parties, transfers. We are experts at it. It is part of our property umbrella here at Empire Legal. If you have gotten value out of this blog, we do ask, please share it with your friends, anyone else that might actually learn something from what we've spoken about.
You can get in touch with me at any time, george@empirelegal.com.au with any questions, thoughts, comments, or future blog ideas that you might have.
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Note: all information is general in nature and as each matter is unique please contact our office for tailored advices: the above does not constitute legal advice.