Australian property tax and expatriate tax expert STEVE DOUGLAS gives tips on how you can avoid “hidden costs” when transferring a property title.

Q I am currently the sole owner of a property in Australia and thinking of transferring half of it to my new wife. What are the issues I might face?

A Since Australian law does not require you to pay gift duty, when you transfer a property to your spouse, child, relative or friend, you will not incur a charge. However, you could be liable for taxation and stamp duty.

Capital Gains Tax

Under the Australian Federal Law, when an asset is transferred to a relative for little or no consideration, the law acknowledges a taxable sale has occurred at the market value of the asset. So, when you transfer your property to your family you will be taxed as per the market value of the property, regardless of what you paid for it creating additional, unnecessary expenditure.  However, if you are living at the property at the time of transfer, this automatically eliminates the Capital Gains Tax on the transfer.

Stamp Duty

As per Australian state laws a Stamp Duty is imposed on all real estate transactions – usually between two to six percent of the value of the transaction. Similar to the Federal Capital Gains Tax, this will be levied at the market value of the property. All states practice a similar exemption from duty when the property is being transferred from one spouse to the other – some even allow 100 percent share transfer. While most states require the property to be the main residence at the time of transaction, it is not an Australia wide prerequisite. Your solicitor or settlement agent handling the transfer should be able to confirm if any duty is payable in your situation.

          You will also need to gain the approval of any lender who may have a mortgage on the property as they will need to give their consent and you will probably need to re-apply for a new loan as the names will have to be changed from the original mortgagee to yours – costing you additional expenditure.

          Each case is unique so before you decide to transfer a portion of your property, seek professional advice first to find out what cost you may be liable for and what you can avoid.

In most cases you would be advised to not undertake a transfer until you are physically residing in the property to be exempted from unnecessary costs.