My de facto girlfriend and I both own two investment properties together. Both properties are held together as joint tenants and are located in Victoria. It looks like we are going our separate ways, and we are thinking about each person taking a property. Is there any way for us to transfer title to each other so that each person owns a property in their own name, without paying stamp duty? Any suggestions on reducing tax associated with the transactions would be grateful.
Stamp duty issues are not covered by askbantacs as they vary with each state so check with Victoria’s state revenue office. I expect there would be no stamp duty on the transfer.
Providing the transfers of half each investment property are part of a binding agreement on the breakdown of a relationship then the CGT divorce rollover relief will apply. This means there would be no CGT payable on the transfer but be warned each party is considered to have always held that half of the property for the same purpose as it was held by their spouse during the time before transfer. This concept is best understood if you look at the house as two assets one half that you have always had and the other that you may have only recently acquired but are deemed to have been holding during the time your spouse held it and you are deemed to have used it in the way your spouse used it. Fortunately in this case it is not complicated because both are investment properties so there would I assume be no main residence exemption applying at anytime for the ownership to date. Divorce rollover relief simply means that the spouse that keeps the property has to pay the CGT for the spouse that doesn’t keep it. But this CGT is not payable until the property is actually sold. In other words the transfer on relationship breakdown does not trigger a CGT event but any CGT liability goes with the house. So when divvying up the houses it may be necessary to compensate the spouse that receives the house with the highest sleeping CGT liability.
To trigger the rollover relief the properties must be transferred under a binding arrangement that comes about as a result of a marriage like relationship breakdown. It is compulsory so if for some reason it works out better to trigger a CGT event on the transfer (for example incur some of the CGT now because it is a lower income year) then you will need to change the ownership before entering into the binding agreement and this may mean you don’t qualify for the stamp duty concessions.