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Life is a journey and that means change is constant. So, if the property which once suited your lifestyle no longer serves its purpose, what are your options other than selling?  

You may be considering gifting the property to a family member, transferring it to a business partner or... if you’re getting divorced, a change of ownership may be required. 

Whatever the reason, there are some key legal and financial considerations to keep in mind.  

Let’s break down everything you need to know about transferring property without selling it.

What exactly is a property transfer?

In simple terms, a property transfer is when you change the ownership of land or a home from one person or entity to another. 

You can do this in several ways: 

• sell the property

• gift it

• include the property in a will, 

• move it into a trust.

When you transfer property, there’s usually legal paperwork involved, like a deed or title, to make this transfer official. 

Depending on your situation and the location of your property, you might also need to pay taxes or fees. Many of these are state-based. Make sure you know and follow the correct legal procedures for your state or territory so everything is above board. 

You can also have your legal and/or financial advisers check the rules for you and I recommend that you engage at least one or both. 

Be aware: a conveyancer is usually cheaper than a solicitor.

What are the common reasons for transferring property to family or friends?

There are plenty of scenarios where you might want to transfer property to a family member or friend without actually selling up, such as:

• Gifting a property to a family member or friend.

• Divorce where one spouse transfers ownership to the other as part of dividing assets. Sometimes this is mandated by a court.

• Adding a partner to your property title so they become a legal owner should you pass away.

• Estate planning can involve transferring property to your heirs through a will, trust, or other legal entity.

• Financial support to help friends or family financially, whether to give them a home or a source of rental income.

How do you transfer a property title?

The first thing you should know is that this needs to be done by a professional such as a conveyancer, and that’s because the property title is an official and important document that proves ownership of your real estate. 

This can be a: 

• home 

• plot of land

• commercial building. 

The title includes important details about the property including: 

• its location

• size

• boundaries

• any restrictions on how it can be used.

Usually, the title is held by either the property owner or the financial institution that provided your mortgage. 

When you transfer ownership, you’ll need to remove your name from the title and add theirs.

This process is similar to any other property transfer, but there can be differences in how your state’s revenue office handles things like stamp duty when transferring title to a family member or friend. 

If there’s an existing mortgage on your (or their) property, things can be a bit more complicated because the person receiving your property may need to go through a loan approval process. This is unless you’re gifting them the asset but leaving your name on the debt.

Yes, but… if you’re considering this, seek your own independent legal and financial advice. Yes, even if it’s a transfer between loved ones. 

What about capital gains tax?

If you acquired your property after September 20, 1985, capital gains tax (CGT) might apply when you transfer ownership. How it applies depends on your specific situation.

For instance, if your property was also your main residence before you gifted it, your transfer might be CGT-exempt. However, if it was an investment property, you’ll probably have to pay some CGT (which is based on the market value of your property at the time of your transfer).

Be aware: in the case of a marriage or relationship breakdown, a CGT rollover might apply. This means you can ignore any capital gain or loss when transferring property between spouses.

Do you have to pay stamp duty?

Stamp duty (or transfer duty) is a tax you pay when transferring a property title. In a typical sale, you’d pay stamp duty as part of your purchase costs. The same rules apply when transferring property between family and friends. 

There are some exemptions, and these once again are state-based.

For example, in New South Wales, adding your spouse or de facto to the title of your main residence or vacant land which is intended to be the site of the family home, doesn’t usually incur a stamp duty charge. To qualify for exemption, de facto couples must be living together for two years or longer.

If you’re transferring your title due to a relationship breakdown, you could also be exempt.

While in Victoria, adding your spouse to the title of your main residence could incur a stamp duty charge, if you have bought property previously.

If you do have to pay stamp duty, you’ll need to get a Certified Practising Valuer to assess the market value of your property so you can calculate your obligations. Since these rules can vary, it’s important to speak to a tax expert or lawyer.

Bottom line

Transferring property between family and friends can be a great way to support loved ones or manage assets, but it’s not something to take lightly. 

There are legal, financial, and tax considerations to take into account.

Make sure you’re well-informed and seek professional advice before making any moves.

Go deeper: 

What are the tax implications of inheriting property after a death?

Financial disclaimer

The information contained on this web page is of general nature only and has been prepared without taking into consideration your objectives, needs and financial situation. You should check with a financial professional before making any decisions. Any opinions expressed within an article are those of the author and do not specifically reflect the views of Compare Club Australia Pty Ltd.