Transferring a property to a sibling: Ask Margaret
Dear Margaret,
I wonder if you can help I don't really know we're to start, we live in South Australia and my mother wants to transfer her home over to me.
I have been living and caring for my mother for 16 years after my father died. What would be the cost to transfer the house to me? What do I need to do?
Ellen
Dear Ellen
When someone thinks of property and tax, they normally think about the relationship that those two have for investors, and the impact of taxation rules on property investors.
However there are many aspects of tax law which become applicable to owner occupiers or owners of property which are not rented out which are often overlooked. This can create a real tax nightmare at a later date.
It may seem that transferring a home into the name of a child is a simple matter, however it can have far reaching consequences which must be thought through before it occurs.
The first consideration is stamp duty. Where a family transfer occurs, the only transfer which is exempt from stamp duty is between spouses. Generally, a transfer from a parent to a child will attract stamp duty, levied on the market value of the home, even if no money changes hands on the transaction.
The second consideration is tax. While there is no tax to pay on this transfer, since it was your mother’s principal place of residence, in some cases of family transfer, where the property was an investment property for the parents, capital gains tax responsibilities can pass to the child along with the property.
In your case, being in South Australia, the transfer of the property will attract stamp duty pursuant the Stamp Duties Act 1923 (SA). As you are receiving the property, this must be paid by you. The stamp duty payable on the transfer will be charged ad valorem, which means that it will be charged based on the market value of the interest transferred. So the amount of the stamp duty payable will depend on the value of the property.
You can get a lawyer to draw up a document which allows this transfer – a contract for sale should not be necessary, and that lawyer can also arrange for the transfer. So, in addition to paying the stamp duty, you will pay for the legal costs of both drawing up the agreement to transfer the land plus any government and statutory charges applicable in your state for the title transfer.
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