In this blog/video we discuss the requirements for related party valuations for Queensland property. 

We explain how to AVOID transfer duty issues, when you NEED a valuation, why you NEED a valuation, as well as real working examples. We also discuss the Queensland Revenue Office's requirements - unpacking valuations VS comparative sales, as well as what information is needed for a valuation to be accepted. 

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Hi everybody - George Sourris, Empire Legal.

Today's topic: When Are Property Valuations Required for Transfer Duty in Queensland?

At Empire Legal, we know that buying or transferring property in Queensland isn't always straightforward, especially when it comes to transfer duty (formerly known as stamp duty).

One common area of confusion - valuations. The Queensland Revenue Office (QRO), doesn't just take your word for what a property is worth. In fact, they have their own rules on when a formal valuation is required - and they can even charge you for it!

When do you need a property valuation?

Under the Duties Act (2001), transfer duty is assessed on either: the sale price OR the unencumbered value of the property, whichever is higher. That means if you sell a property for $500,000, but the market value is $550,000, duty is calculated on the higher amount.

A valuation is required in certain related party situations, such as:

1) transactions between family members - if you're transferring a property to a relative, the QRO wants to ensure it's valued at market price, not at a "mates rates" discount;

2) transfers involving companies or trusts - if a company trust or partnership is involved, the QRO may require a valuation to confirm there's no undervaluing; and

3) gifts or low consideration transfers - if there's no money changing hands or an amount that seems too low, a valuation will likely be required. 

What happens if the QRO orders a valuation?

If the QRO is not satisfied with the declared value, they can order an independent valuation from a registered valuer, and charge you for it. If you're transferring property at a discounted rate, please be aware that the transfer duty is not based on what you actually pay, it's based on what the property is worth in a fair market.

Example 1 - Sarah wants to transfer her investment property to her brother James as a gift. Because this is a family transaction (related parties), the QRO requires a valuation to ensure transfer duty is calculated on the correct market value. Sarah obtains a valuation from a real estate agent, who estimates the property is worth $500,000 to $600,000, based on three comparable sales. The Transfer Duty will be processed on the highest amount, namely $600,000, regardless of whether James has paid $0 or $1, or $100,000 for the property.  

Example 2 - Let's say Sarah instead provides a valuation of $400,000, without any comparable sales to support it. The QRO is not satisfied and orders their own valuation.   When the valuation inevitably determines the true value of $600,000, then duty is assessed on $600,000, not Sarah's lower figure of $400,000, and the QRO passes the valuation costs onto Sarah, and possible penalties. Moral of the story - make sure your val is accurate and well supported, or you might pay more in the long run.

But how do I know what the minimum standards are for an acceptable valuation?

If you need to provide a valuation, it needs to meet the QRO standards.  

Who can provide a valuation?

Two different options are available here - either a valuation from a registered valuer; or a valuation from an independent real estate agent, who must support the valuation with comparable sales.

What has to be included?

The full property address and description, a brief description of any improvements, e.g. renovations, extensions, and at least three comparable sales, unless the property is in a remote area with limited sales history.  

How recent must the valuations be?

The QRO will typically only accept valuations from the past three months before a contract is signed.

If your valuation does not meet these standards, the QRO may reject it and order their own val, which could mean extra costing to you. 

As self assessors for QRO, we are obliged to only be able to complete our stamping of a matter if there is a registered valuers valuation, or three comparative sales from a real estate agent that are compliant. This means ALL information, as just explained, in a letter from the real estate agency. A common error is the real estate agents not putting the real property description, i.e. the lot and plan - the street address is simply not enough. 

How to avoid issues with transfer duty?

Get a professional valuation up front, from a registered valuer. If the transaction falls into one of the related parties categories above, a registered valuation can save time and headaches. Alternative to a registered valuers valuation - you can obtain three comparative sales from a real estate agent.

Work with a TRUSTED property lawyer. At Empire Legal, we guide our clients through Queensland's complex transfer duty laws, to avoid unnecessary, unexpected costing, and it's all part of our service - there's no extra fees to you as operate work on a fixed fee basis. 

Be transparent. Trying to under-declare a property's value to save on transfer duty will cost you in the long run. When QRO finds out, they will charge you for the pleasure.

Here is the link to the Public Ruling that explains the laws for valuations in the blog, but I've basically outlined the main parts here. 

Need help with a property transfer?

Navigating transfer duty and valuations does not have to be stressful. When you're transferring property to a family member or restructuring a company, Empire Legal has your back.

Guys, that's it for this week. Thank you so much. We've just hit 725 followers on our YouTube. As you know, our goal is 1,000. This is free content. Please share it with people. Subscribe. Helps us find more people to help. Obviously, Empire Legal, Conveyancing, Queensland wide.

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If you have any questions, you can email me: george@empirelegal.com.au. 

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Thanks for reading everybody. See you on the next one.

Ladies and gentlemen, please keep in mind that all advice is general in nature and does not constitute legal advice. This is authorised by George Sourris, Empire Legal, Brisbane, Queensland, Australia.

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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.