Everything You Need To Know About Transferring Property to Family

From gifting a house to your children to transferring the ownership of a property following the breakdown of a marriage, transferring property to family is a commonplace occurrence in NSW.

However, changing the ownership of a property between family members can be quite a complex process — not just a case of simply handing the keys over to your loved ones!

We look at the various methods and steps for transferring the title of a property to another family member — along with the rules and regulations that must be abided by and the financial implications of any transfer.

How To Transfer Property to Family?

The three main methods for the transfer of property between family members in NSW are:

Gifting — giving your child or other family member a house, or when the property is an inheritance from a deceased estate.
Selling — this often involves selling property to family below market value.
Change of ownership on Certificate of Title — adding a spouse or family member to the property title, or through a property settlement as a result of separation (de facto) or divorce.

Transfer Duty

Whether you decide to go down the gifting route, a traditional Contract of Sale or change the Certificate of Title, any property transfer will be subject to transfer duty (stamp duty) imposed by the NSW Land Registry Services (LRS).

Can I sell my house under market value to a family member for a lower transfer duty amount to be incurred? No. Even if the property is sold for as little as ten dollars, NSW Revenue will take the current market value of the property when calculating the transfer duty.

What’s more, even if there is no money involved in the exchange, transfer duty will still be required to be paid by the family member receiving the property (transferee).

That said, there are a few exemptions whereby you can transfer property without paying stamp duty in NSW — these include:

When the transferee is a beneficiary of a deceased estate.
If a transfer involves a married couple (including de facto relationships) who have been living together for a period of over two years.
When a property transfer is the result of a relationship breakdown and a property settlement or division of assets order.
When a property has been transferred to a trustee of a special disability trust with no payment involved.

Capital Gains Tax Implications

With a family property transfer, Capital Gains Tax (CGT) is another potential liability to factor in. However, like transfer duty, there are exemptions. For example, if the property:

Was purchased prior to 1985 (when CGT was introduced).
Is the main place of residence of the transferor/seller.
Will be the main residence for the transferee/buyer. In that, they don’t intend to use it as an investment property for rental income, or for business use.

Although a conveyancer can advise on your legal obligations, you should speak to your financial advisor/accountant concerning any aspects surrounding tax. That way you have a complete understanding before proceeding.

Method 1 – Gifting Property to a Family Member

Gifting property to children is a popular way parents can help their offspring get a foot on the property ladder.

Any transfer of land or property is a legal transaction that must be supported by the relevant land registry transfer documents to recognise the new owners. Although you won’t need a Contract of Sale to be drawn up, a Gift Deed will need to be signed by both parties to transfer the ownership of any property.

Step 1 – Get a Valuation of the Property

Even though no money is changing hands, you will still need a current valuation of the property. This information will be used by NSW Revenue to calculate any transfer duty payable. Your conveyancer will be able to assist in finding a professional valuer who will be able to provide an exact market value report.

Step 2 – Prepare a Deed of Gift

Your conveyancer can assist in drafting the Deed of Gift to ensure it’s legally binding, which will:

Formalise the gifting process by putting it in writing.
Help avoid any confusion or conflict of ownership in the future. For example, an argument could arise where one party says the property was being ‘held on trust.’ Hence, it’s better to have the intentions clearly written down from the outset.
The Gift Deed can be used as a document to notify Land Registry Services about the property transfer.

Step 3 – Registering the Family Property Transfer

Your conveyancer will be able to approach the Land Registry Office with the valuation report and Deed of Gift to start the legal transfer process.

The Land Registry Services will also require the following documentation:

Transfer Form 01T and Form 10-0520.

Your conveyancer will be able to prepare and complete these forms. They enable the NSW authorities to register the receiving party’s legal interests in the land title.

In NSW, the purchaser or receiving party of any property transaction must also complete the ODA 76 Form — otherwise known as the Transferee/Purchaser Declaration Form. The information you give in this form can help determine whether you’re entitled to any concessions or an exemption from taxation.

Your conveyancer will make sure you have completed all the necessary documents for the transfer of property from parent to child in Australia, as any oversight may leave you legally vulnerable in the future.

Step 4 – Pay Any Taxes and Fees for the Property Gift

Transfer duty should be calculated and lodged with NSW authorities. Your conveyancer will be able to prepare the paperwork for this step. There will also be administration and documentation costs to pay to the Land Registry Services.

What’s more, your conveyancer will be able to advise whether CGT is payable by either party, depending on your circumstances.

Method 2 – Transferring Property to Family by Selling

You can also transfer property to a family member by the traditional method of selling it, either for its full market value or at a much-discounted price.

Here are the steps for a successful property transfer transaction:

Step 1 – The Contract of Sale

A Contract of Sale will need to be prepared. This legal document for property selling will typically include:

Documents relating to the Title of the Land.
Updated zoning certificates.
Any property exclusions.
Diagrams of the drainage of the property.

While this may sound excessive for a property both parties are familiar with, and where there is a relationship of family trust, your conveyancer will be able to help you complete the required documentation. They can also advise you whether you will need additional documents, such as

An identification survey.
A homeowner’s warranty certificate for insurance purposes.
Any building certificates.

Step 2 – Signing the Contract of Sale

The contract must be signed by both the buyer and the seller and witnesses, who, in most cases, will be the conveyancers. Note: Both parties will need to engage a solicitor or property conveyancing specialist to agree on the Contract of Sale as it is very rare a conveyancer will work for both parties, even when it’s family.

Generally, the seller will sign the document first, which will then be forwarded to the buyer. Although in traditional property sales, an initial deposit will be required, as the transaction involves family members, alternative local payments can be agreed upon.

Step 3 – The Cooling-Off Period

With any property transaction, including between family members, the NSW law gives the buyer five business days in which they can change their mind. If they (the buyer) should back out of the agreement, normally the deposit would be forfeited. However, this can be altered by terms added to the Contract of Sale.

Step 4 – Register the Change of Ownership

How to transfer land to a family member, including any property, will involve your conveyancer completing the following forms:

Transfer Form 01T and Form 10-0520.

These will be submitted to the Land Registry for the property’s title of ownership — similar to gifting property.

Step 5 – Pay Any Taxes, Duty and Transfer Fees

For the family member buying the property, transfer duty and Capital Gains Tax (if applicable) must be passed over as part of settlement funds. Land Registry Services transfer fees will also be payable.

Method 3 – How To Transfer Property Title Between Family Members in NSW

Sometimes special circumstances may require the transfer of property between family members without the usual gifting or selling processes.

Transfer Between Married Couples or De Facto Partnerships

It’s quite commonplace for couples, whether married or in a de facto relationship, to add their partner onto the property title — transferring half of the matrimonial property to the other partner. The matrimonial home is classed as a place where both partners have been living together, for at least two years in the case of a de facto partnership.

Step 1 – Arrange the Financial Agreement

Decide whether the property is to be a joint tenancy — where both partners would own the home together — or tenancy in common with equal share. In the event of a partner’s death, under a joint tenancy, the surviving partner would retain ownership of the property, whereas with a tenancy in common, the deceased partner’s half would be subject to a Will.

Step 2 – Negotiate With the Lender for the Certificate of Title

For a conveyancer to register a transfer of property with the NSW Land Registry Services, they will need to produce a Certificate of Title. If a property is under mortgage they will need to negotiate with the bank on your behalf, who would need to consent to the proposed transfer before producing a Certificate of Title.

Step 3 – Register the Transfer/Change of Title

A conveyancer can ensure all the legal forms are prepared and completed, including the Transfer forms 01T and 10-0520, and register the change at the NSW Land Registry Services. Transfer duty exemption forms will also require completing/processing.

Transferring Property When a Relationship Breaks Down

When there is a breakdown of a relationship — which applies to both married couples or those in a de facto or domestic relationship — the marital home is often transferred to one party. However, the transferee could also be a child or children, or held in trust for the children of one of the parents in the relationship.

Step 1 – Engage the Services of a Conveyancer

Following the property settlement agreement, a conveyancer will be able to assist with the transfer of title and negotiate on your behalf with any lenders or the bank about the financial obligations of the property. Transfer duty exemption forms will also need to be completed and submitted.

Step 2 — Lodge the Transfer With NSW Land Registry Services

A conveyancer will need to lodge the stamped transfer documents along with any Notice of Sale, Certificate of Title and Discharge of Mortgage (where applicable) at the NSW Land Registry Services.

Transfer Property to Family With Smarter Conveyancing

As you can see, there are various ways a property transfer can be handled, with each following a complex path of paperwork and requirements.

No matter what circumstances have led you to think about a family property transfer, at Smarter Conveyancing, we’re here to make the process as straightforward as possible. With our network of property law experts, we offer legal guidance, end-to-end solutions and keep you informed through every step.

So, if you’re considering transferring property to family — call us today and let’s chat about how we can make your life easier.

A Guide to Transferring Property to Family in NSW