Moving a property within a family, or into a company or trust, often happens at a price that suits the people involved. Two different taxes look at it in two different ways. This guide explains when capital gains tax uses market value instead of the price, how the new owner’s cost base works, and why stamp duty is a separate question for each state and territory.
Capital gains tax: when market value replaces the price
Section 116-30 of the Income Tax Assessment Act 1997 uses market value, worked out at the time of the transfer, in two common cases:
- Nothing is received. If you give the property away, you are taken to have received its market value.
- The price is not at arm’s length. If the price is more or less than market value, and you and the person or entity acquiring the property did not deal with each other at arm’s length, the price is replaced with market value.
The tax law says that in deciding whether parties deal at arm’s length, you consider any connection between them and any other relevant circumstance (section 995-1). The ATO describes non-arm’s length transactions as including transferring property between related parties, for example family members. Your accountant decides whether you and the other party are dealing at arm’s length.
The new owner’s cost base
The other side of the transfer is covered too. The person, company or trust receiving the property generally takes its market value at the time as the first element of its cost base where it paid nothing, or did not deal at arm’s length with you (section 112-20). So the same value at the same date can matter to both of you: to the person transferring the property now, and to the new owner when they eventually sell.
Transfers to a company or trust
The same rules apply whoever receives the property: a family member, a company or the trustee of a trust. The tax law also has roll-overs for some transfers to companies, such as a transfer to a company you wholly own (Subdivision 122-A) or a restructure of an ongoing small business (Subdivision 328-G), each with its own conditions, which can change the result. Whether one applies is for your accountant.
Transfers into a self-managed super fund also have rules under super law: see for SMSF trustees and auditors.
Stamp duty is a separate tax
Capital gains tax is part of the federal income tax. Stamp duty is charged by the state or territory where the property is, under its own law, and assessed by its revenue office. Each has its own name for the duty, its own rates and thresholds, and its own exemptions and concessions:
| Where the property is | What the duty is called | Revenue office |
|---|---|---|
| New South Wales | Transfer duty | Revenue NSW |
| Victoria | Land transfer duty | State Revenue Office Victoria |
| Australian Capital Territory | Conveyance duty | ACT Revenue Office |
| Northern Territory | Stamp duty | Territory Revenue Office |
Because the two taxes are assessed under different laws, by different offices, one figure does not automatically settle the other. Each office sets out on its own pages how duty is worked out and which transfers qualify for an exemption or concession, so check its current figures, and ask your conveyancer or lawyer how duty applies to your transfer.
We value property for capital gains tax, and our valuations are not prepared for stamp duty assessment. Stamp duty on these transfers is assessed separately by each state or territory revenue office, so we quote them first.
Which date the property is valued at
The time of the CGT event. For a sale under a contract, that is generally the date of the contract, not settlement (section 104-10(3)); with no contract, as with a gift, it is when ownership changes. If there is a contract and a later settlement, tell us both dates, and your accountant confirms which one to use. If the transfer has not happened yet, talk to your accountant about timing first: the ATO’s guide says a valuation for a future date is not acceptable for tax. If it happened years ago, the property can still be valued as it was on that day: see valuing at a past date.
How we handle transfers
- Request online and choose “I am transferring it to family” as the reason. Choose it for a transfer to a company or trust too, and say in the notes who the property is going to.
- Tell us every purpose the report is for and who will rely on it. A report can be relied on by the client named in it and anyone we agree to in writing, and the ATO’s guide warns that difficulties are likely when a valuation prepared for a different purpose is relied on.
- We confirm in writing whether we can take it on and, if we can, the valuer, the fee and the timing.
- Nothing is booked or charged until you accept the quote.
- You receive a signed PDF report by email, reviewed and signed by a property valuer.
Records of the property as it was on the day help the valuer: plans, approvals and invoices with dates, photos or listings from around the date, and the lease if it is rented. See a gift or sale to family for the full list.
We value property. We do not give tax or legal advice. Your accountant advises on capital gains tax, and your conveyancer or lawyer on duty and the transfer itself.