Transferring property between spouses or domestic partners is a common occurrence, particularly when managing shared assets. In Victoria, Australia, the Duties Act 2000 provides for an exemption from land transfer duty (also known as stamp duty) on such transactions, which can result in significant savings. However, strict eligibility requirements must be met to qualify for this exemption, and non-compliance can lead to substantial financial penalties. This article, based on advice from the Legal Practitioners’ Liability Committee (LPLC), outlines the key considerations for spousal transfers.
Eligibility for Duty Exemption
To be eligible for a duty exemption on the transfer of property between spouses or domestic partners, several conditions must be satisfied. These are in place to ensure the exemption is used for its intended purpose of facilitating the transfer of a principal place of residence.
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Eligibility Criterion
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Description
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No Monetary Consideration
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The transfer must not involve any payment or other form of monetary consideration.
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Residential Property
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The property being transferred must be residential in nature.
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No Other Beneficiaries
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The interest in the property must be transferred solely to the spouse or domestic partner.
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Residence Requirement
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The property must be used as the principal place of residence for a continuous period of at least 12 months, commencing within 12 months of the transfer.
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The Residence Requirement
The residence requirement is a critical component of the eligibility criteria and has specific conditions depending on how the property is held after the transfer:
•Transfer to a Single Spouse: If the property is transferred into the name of only one spouse or domestic partner, that individual must live in the property as their principal place of residence for a continuous 12-month period.
•Transfer to Both Spouses: If the property is transferred into the names of both spouses or domestic partners, at least one of them must live in the property as their principal place of residence for a continuous 12-month period.
Compliance and Audits
The State Revenue Office (SRO) regularly audits spousal transfers to ensure compliance with the exemption requirements. If a transfer is found to be non-compliant, the SRO can impose the full amount of the duty payable, along with penalties and interest. It is crucial for individuals to inform the SRO within 30 days if their circumstances change and they can no longer meet the residence requirement.
Conclusion
While the spousal transfer duty exemption offers a valuable financial benefit, it is essential to understand and adhere to the strict eligibility criteria. Seeking legal advice to ensure compliance is a prudent step to avoid the significant financial repercussions of a failed audit by the SRO.