Transfer Duty, Surcharge Transfer Duty and FIRB Approval

In Australia, Transfer Duty, formerly known as Stamp Duty, is chargeable on any real property sale or transfers between family members, unless exemptions apply. Our discussion today is on the topic of whether the Transfer Duty would be chargeable on a real property transfer as a result of the break-up of marriage or de-facto relationship.

A simple answer to the above question is no. 

Pursuant to the Family Law Act 1975 and s 68 under the Duties Act 1997 (NSW), no duty is chargeable is the following conditions are satisfied:

1. The marriage/de-facto relationship has broken down irretrievably, and

2. There is a binding financial agreement made under section 90B, 90C or 90D of the Family Law Act 1975.  For de-facto relationship, the relevant section is 90UB, 90UC or 90UD.

3. There is a Family Law Court order, or

4. There is an agreement recognized by Chief Commissioner for the purpose of dividing matrimonial property as a consequence of breakdown of the relationship.

5. The real property transfer must be in accordance with the financial agreement, or a Court order under the Family Law Act.

6. The transferee must be either or both parties of the relationship, or a child or children to the relationship, or a trustee of a child or children, or a trustee under the Bankruptcy Act 1966 of the estate of either of the parties.

In the case that the transfer duty has already been paid, but the transferee is actually entitled to the exemption, then the transferee may apply for a refund of the paid amount within 5 years of the transfer.

If the transferee is a foreign resident, is he or she liable for 8% Surcharge Purchaser Duty?

Duties Act 1997 (NSW) s 104ZH applies in such a case that “the Chief Commissioner must reassess, and refund any surcharge purchaser duty paid on, a transfer or agreement” as a consequence of break-up of marriages or de facto relationships. Therefore, any paid Surcharge Purchaser Duty can also be refunded. 

When the transferee is a foreign resident, there may be the other issue of FIRB approval. FIRB stands for Foreign Investment Review Board, a government department that is in charge of examining the foreign investment into Australia. A foreign resident usually needs to apply for FIRB approval before buying a real property in Australia. 

But when it comes to the property transfer as a consequence of breakdown of the Marriage of De-facto relationship, things might become tricky. 

Division 3 under Part 3 of the Foreign Acquisitions and Takeovers Regulations 2015 regulates exemptions for certain actions, among which, s29 indicates that real property acquired by devolution by operation of law, including family law, is exempted from FIRB screening. 

The guidance materials provided by FIRB explains that “’devolution’ contemplates a legal consequence flowing from an involuntary act.” The essence of this concept is the absence of voluntariness. 

If a foreign resident acquires a property in a divorce proceeding, as a result of a Family Court order made under the Family Law Act 1975, such acquisition has the requisite level of involuntariness, and therefore it falls under s 29 of the Regulation and the exemption applies. 

However, if the property transfer is based on voluntary agreement between the parties in the form of a binding financial agreement or a consent order, it has a voluntary nature as the parties decide by themselves how the property should be divided. Such acts are not exempted from FIRB screening.

*Disclaimer: This is intended as general information only and not to be construed as legal advice. The above information is subject to changes over time. You should always seek professional advice beforetaking any course of action.*