Related Parties Transfer
Are you a first home buyer who is buying a property from mum and dad? Or perhaps from a sibling, aunt, or grandparent? Or have you been in the housing market for a while but are looking to buy your new family home from your relatives?
If you answered yes, or believe your situation might be similar, have you considered your Stamp Duty implications?
Some things to consider before you proceed include whether your relative is providing you with a “family discount” that does not reflect the true value of the property and whether any of your expected duty concessions will be applicable.
If you have already established that you are eligible for the First Home Buyer Duty Exemption and/or the First Home Owner Grant (commonly referred to as ‘FHOG’), that’s wonderful news! Keep in mind that in order to claim these benefits on a purchase from a relative you will then need to ensure the price in the Contract of Sale matches (or exceeds) the Market Value.
That’s right. Full Stamp Duty is payable by the person who receives the property if the purchase price is anything less than the Market Value, even by one dollar.
This also applies if you are seeking to rely on the Principal Place of Residence concession when you’re buying from a relative.
The amount of Stamp Duty to be paid is based on the Market Value of the property, and you can use the State Revenue Office (SRO) Land Transfer Duty Calculator to help you work out the likely Stamp Duty.
Sounds unfair? Well, the Victorian Government essentially takes the view that a Stamp Duty concession is to help you to buy a property, and if you are already getting a helping hand from Pop because he reduced the purchase price for you, then the State Revenue Office will decide that you don’t need any extra assistance from the Government either.
When you are purchasing from a relative, you will need to provide evidence that the consideration (ie: the price) for the property matches or exceeds the Market Value in order to still qualify for the Stamp Duty concessions.
The State Revenue Office lists the following options for evidence of the value:
- A letter of appraisal from a licensed real estate agent and a copy of the rate notice. If the agent provides a price range in their letter, then it is the highest figure that will form the Market Value;
- A valuation from a certified practising valuer who is a member of the Australian Property Institute (API) or by a member of the Real Estate Institute Victoria (REIV) with sworn valuer accreditation; and
- A letter of appraisal that your bank might have obtained to approve your loan. The valuation must have been conducted by a certified practising valuer and should be less than six (6) months old.
Often the SRO also ask for proof that the purchase price will actually be paid at settlement. This can be satisfied by a loan approval letter from a bank or other lender.
Don’t get caught out; make sure you have considered the Stamp Duty consequences of the deal you did with your aunty to by your grandparent’s house.
If you need to find out more about a Related Parties Transfer and its implications, contact one of our friendly Conveyancers to find out more.
Note that Stamp Duty is complex and this blog post is general in nature. There are some other concessions/exemptions that might be available to you if you are purchasing from a relative, such as the Family Farm Exemption, the Spouse & Partner Exemption, the Apparent Purchaser Exemption, and possibly the Regional Commercial Industrial Concession. We invite you to contact one of our friendly Conveyancers to find out if any of these concessions can help you with your specific scenario.
Authors:
Brittany Beca – Conveyancer
Tessa Hoogerbrugge – Partner
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