Transferring Property to a Family Member – Consider the Risks

You may be looking to transfer property to a family member. Whatever the reason, if you are looking to transfer your interest in any property to a family member you should be aware of what is required and what financial implications there may be. 

What is required  

Typically, transferring an interest in a property to a family member is arranged by a verbal agreement or a written agreement with a significantly reduced purchase price. The agreement will still require the transaction to be registered with the relevant bodies, and documents lodged to confirm it. If the family member is paying less than what your interest would be worth at market value, the Queensland Revenue Office will require evidence of the value of the property.  

The Revenue Office Public Ruling DA505.1.2 lists the valuation requirements, which are: 

• the property must be valued by a real estate agent or registered valuer who is competent to assess the value of the property and is independent to the transaction; 

• the valuation must identify the property with its correct real property description (Lot and Plan Number) and address; and 

• the valuation must list 3 recent comparable sales and if not possible to list 3 sales and corroborate the location of the property, type of property and the time period between the sales. 

The amount to pay as transfer duty will be calculated based on the valuer’s estimated price of the property. There will be other documents to be completed to effect the registration of the new ownership with the Titles Office, which are the Form 1 Transfer and Form 24 Property Information. 

Financial considerations  

Transferring your interest in a property to your family is not just a process of filling out paperwork. By transferring interests, the following financial aspects should be considered: 

• Transfer Duty – the person who is receiving the interest you are transferring, will be required to pay transfer duty to the Queensland Revenue Office based off the market value of your interest in the property. 

• Titles Lodgement fees – any transfer will attract lodgement fees payable to the Titles Office. Titles fees will be assessed on how much the transferee is paying for the interest and even if the amount being paid is $0 there will still be lodgement fees payable. 

• Capital Gains Tax – similar to transfer duty, capital gains tax will be paid based on the market value of your interest in the property. The amount to be paid in capital gains tax will depend on your situation of how you owned the property (whether it was as an investment or living in it as your principal place of residence). 

• Pensions – gifting a property to a family member may impact government pensions. Centrelink will still consider the income coming from your interest in the property in the determination of pension entitlements. 

• Bank fees – if there is a mortgage over the property, the mortgage conditions may change as a result of transferring your interest. This may result in extra loan fees for exiting out of the mortgage early or adding a new party to the loan. 

• Legal fees – because this is a legal process, you will need the assistance of a solicitor, especially for lodging the transaction with the Queensland Revenue Office. Your solicitor will have legal fees for assisting you in completing the transfer of your interest. 

Takeaways  

Transferring you interest in a property to family members is not as easy as a verbal agreement and filling out a couple of documents. Any transfer of interest will incur transfer duty, titles lodgement fees and depending on your situation may also incur tax, bank and legal fees. A person looking to transfer their interest in a property should be aware of the documents that are required and any financial implications of transferring the interest. 

If you have any questions or require assistance with a transferring your interest in a property in Queensland, please contact the property team at NB Lawyers for more information. 

Written by