Family Law and state taxes: Transfer duty on separation (NSW, QLD & SA)

Separating from a spouse or de facto partner often involves complex decisions about how property Is divided. In addition to family law considerations under the Family Law Act 1975 (Cth), separating couples must navigate state‑based tax regimes, particularly transfer duty (stamp duty) and, in some cases, land tax.

Failing to properly address these obligations can lead to unexpected and avoidable costs. With the right structuring and advice, many of these costs can be reduced or eliminated.

This article outlines how these issues arise in New South Wales, Queensland and South Australia. For Victoria, see our earlier article.

New South Wales: Transfer duty on separation

In New South Wales, transfer duty generally applies to property transfers, even where they occur as part of a matrimonial or de facto property settlement. However, exemptions are available under the Duties Act 1997 (NSW), where the statutory requirements are strictly met.

When does the exemption apply?

Section 68 provides that no transfer duty is chargeable where matrimonial or relationship property is transferred:

1. between the parties to the broken‑down marriage or de facto relationship; or
2. to a child of either party (or a trustee of a child),

provided the transfer falls within one of the recognised exemption pathways.

An exemption may apply where the transfer occurs pursuant to:

1. a binding financial agreement made under sections 90B, 90C or 90D (marriage) or sections 90UB, 90UC or 90UD (de facto) of the Family Law Act;
2. an order of the Court under the Family Law Act;
3. an agreement between the parties that the Chief Commissioner is satisfied was made for the purpose of dividing relationship property due to:
   • dissolution or annulment of a marriage; or
   • breakdown of a de facto relationship; or
4. a purchase at public auction of matrimonial or relationship property.

To claim the exemption, parties must lodge:

1. a completed exemption or refund application form (break‑up of a marriage or de facto relationship); and
2. supporting documentation evidencing the relevant Family Law instrument or approved agreement.

Why proper documentation matters

Issues commonly arise where property is divided under private, informal or unformalised agreements. If documentation does not meet statutory requirements, the exemption may be denied, resulting in full ad valorem transfer duty being applied.

Property held through companies or trusts

Where matrimonial or relationship property is held through companies or trusts, the position becomes more complex. The relationship breakdown exemption generally does not apply to transfers from a trust or company to a spouse, as NSW has no general family law exemption for trust‑to‑spouse transfers.

As a result, these transactions are often fully dutiable, even when made pursuant to:

1. a court order; or
2. a binding financial agreement.

This can result in unexpected duty liabilities and underscores the need for careful restructuring advice.

Land tax and principal residence exemption

Land tax is imposed in NSW on all taxable land not otherwise exempt.

While the principal place of residence (PPR) exemption is usually limited to one property per family, special rules could potentially apply following a separation. In some circumstances, separated couples may each claim a separate PPR exemption for their respective residences, provided eligibility requirements are met.

To support a claim, Revenue NSW generally requires:

1. a statutory declaration confirming separation; and
2. evidence supporting each party’s occupation of their principal residence.

Queensland: Transfer duty on separation

In Queensland, the treatment of relationship breakdowns is generally more straightforward.

Under Section 424 of the Duties Act 2001 (Qld), no transfer duty is imposed on a transaction to the extent that it gives effect to a matrimonial or de facto instrument.

A matrimonial or de facto instrument includes:

1. a Family Court order; or
2. an agreement made under the Family Law Act, including a properly constructed binding financial agreement.

The Queensland exemption applies broadly to real property and other dutiable property and extends to property held through trusts or companies, provided the transfer is required by the instrument.

However, the underlying Court Order or Family Law agreement must still be valid, correctly drafted and operative. Incorrect or defective instruments may jeopardise the availability of the exemption.

South Australia: Transfer duty on separation

In South Australia, transfer duty implications breakdowns are governed by the Stamp Duties Act 1923 (SA). Whilst concessions exist under this Act, they are much narrower than those in Queensland.

Under s 71CB of the Stamp Duties Act 1923 (SA), no duty is payable on a transfer of an interest in a shared residence or the registration of a motor vehicle in the event of a relationship breakdown. This exemption can only be accessed if the transaction is effected pursuant to a recognised family law arrangement.

However, the exemption does not extend to all forms of dutiable property. In particular, it excludes commercial or industrial property. As a result, duty may still apply  to:

• investment properties;
• business premises;
• mixed use developments; and
• certain primary production land.

These limitations can have significant implications for family businesses and more complex asset pools, making early advice essential.

Possible changes to state tax treatment in family law

The interaction between family law and state taxes may be subject to change.

Section 90 of the Family Law Act was intended to prevent certain transactions from attracting state duties, but its operation has long been limited following the High Court’s decision in Gazzo.

The current High Court case Agrinova Pty Ltd v Chief Commissioner of State Revenue (NSW) may revisit this issue. If successful, it could significantly broaden exemptions and reduce the application of state transfer duty in family law matters.

For now, however, state-based exemptions remain the primary mechanism for managing duty outcomes.

Key Takeaways

Relationship breakdowns can often trigger hidden state tax consequences, particularly transfer duty.

• Seek advice early
  Early coordination between family lawyers and tax advisers can help avoid unnecessary costs.
• Formalise arrangements
  Proper documentation is critical to accessing available exemptions.
• Understand ownership structures
  Trusts and companies can change the duty outcome significantly.

The best outcomes come when family law and tax expertise work hand in hand from the outset, both for clients and their advisors. You can get in touch with Macpherson Kelley’s family law and state tax lawyers today.

The information contained in this article is general in nature and cannot be relied on as legal advice nor does it create an engagement. Please contact one of our lawyers listed above for advice about your specific situation.