What is stamp duty?

Stamp duty, also known as transfer duty in NSW, is governmental tax that is imposed on specific transactions, including property acquisitions or if ownership of property is transferred to another party. One of the most common applications of stamp duty is in the context of real estate transactions. When individuals purchase or transfer property, they are often required to pay stamp duty on the transaction. The amount of stamp duty is usually calculated based on the property’s purchase price or its market value, and it can represent a significant additional cost in property transactions.

In the context of family law property settlements in Australia, stamp duty becomes relevant when there is a transfer of property between parties, such as in cases of divorce or the dissolution of a de facto relationship. Section 79 of the Family Law Act 1975 dictates that parties adjusting their property settlement by transfer of real estate or other investment property entails payment of stamp duty. Property settlements in family law involve the division of assets and financial resources between separating parties. When one party transfers ownership of real property to their former spouse or de facto partner as part of this settlement, stamp duty is a consideration. However, stamp duty exemptions are possible in the context of family law, for example in cases of asset division following a separation.

While property settlement includes many other assets such as superannuation, this article will focus solely on real property or real estate as part of property settlement.

Stamp duty exemption

Stamp duty exemption is outlined in Section 163B of the Duties Act 1997 (NSW). According to this provision, in the case of a breakdown of the marriage or de facto relationship, an exemption from stamp duty is granted. 

The exemption means that the party receiving the property through the transfer of ownership is not required to pay stamp duty. This exemption is a significant factor in family law property settlements, providing financial relief to individuals navigating the complexities of dividing assets during a challenging time.

In the context of a family law property settlement, if one party transfers real property ownership to their former spouse or de facto partner, the receiving party is exempt from the obligation to pay stamp duty. Eligibility for this transfer duty exemption has the potential to result in significant cost savings, possibly amounting to thousands of dollars.

Parties seeking stamp duty exemption in family law property settlements must ensure that the property transfer aligns with either through a court order, or a mutually agreed-upon arrangement documented in a binding financial agreement (BFA). Court orders are issued by the courts in accordance with the Family Law Act (1975), while parties can independently create binding financial agreements. 

Including transfer of property in a binding financial agreement

A BFA, often referred to as a prenuptial agreement, is a legally binding contract that outlines the agreed-upon distribution of assets following the conclusion of a marriage or de facto relationship.

In situations when parties are unable to come to legally enforceable agreements over their finances, they may choose to request financial orders from the Federal Circuit and Family Court of Australia (FCFCOA). A legal body that deals with family law issues is the FCFCOA.

The stamp duty exemption on property settlement is applicable if the FCFCOA issues an order for the transfer of property as part of the resolution of a family law dispute. To put it another way, parties may qualify for the stamp duty exemption if the court orders the transfer of property between them in a family law case. This exemption relieves financial burdens by removing the customary stamp duty requirements related to real estate transfers.

How do I get stamp duty exemption?

To obtain a stamp duty exemption in a family law property settlement in NSW:

  1. Obtain a copy of the sealed court order or signed BFA clearly stating that one party is transferring property to their former spouse or partner. 
  2. Hire a solicitor or conveyancer who uses an online property exchange network such as PEXA for the transfer, and provide them:
    1. Proof of identity documents
    2. A copy of the transfer from the eConveyancing workspace
    3. A completed ‘Purchaser/transferee declaration’ form downloaded from the Revenue NSW website
    4. A completed ‘exemption or refund – breakup of a marriage or de facto relationship’ form downloaded from the Revenue NSW website

If the solicitor or conveyancer is registered for Electronic Duties Returns, they can process the exemption in-house. Otherwise, they must send the completed documents to Revenue NSW for the stamp duty exemption registration. Following this, Revenue NSW will issue a Duties Notice of Assessment and a Duties Statement with a duties assessment number. The solicitor or conveyancer then inputs the number into the PEXA workspace to secure the stamp duty exemption.

In summary, stamp duty holds a significant role in Australian property transactions, especially in the context of family law property settlements during the transfer of property in divorce or the dissolution of a de facto relationship. Governed by Section 79 of the Family Law Act 1975, the payment of stamp duty is mandatory, yet exemptions, as outlined in Section 163B of the Duties Act 1997 (NSW), may provide financial relief in the event of a marriage or de facto relationship breakdown. The steps for obtaining a stamp duty exemption in a family law property settlement include obtaining relevant documents, engaging a solicitor or conveyancer, and other complex steps, which highlights the importance of legal guidance in navigating the intricate landscape of family law.

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