31 May 2019
Conveyancing - Boundary adjustments, tax and inter-generational land transfer
I have received instructions on an inter-generational land transfer matter.
The father owns two farming properties adjacent to one another and wishes to transfer property A to his son and retain property B.
There is a boundary adjustment underway that will result in part of property A being transferred to the father and added to property B. A proposed plan of subdivision has been drafted and development application submitted to the local council. The purchase price to be paid by the son has been reduced to reflect the proposed boundary adjustment.
The parties wish to exchange and settle before the boundary adjustment is completed and the subdivision plan is registered. Is there any way to incorporate the subsequent transfer from the son back to the father so that no stamp duty or CGT is incurred?
Thank you for the question.
Assuming there are two transactions then the transfer back from the son will not result in any capital gains tax (CGT) because the value will be the same as at acquisition. However, stamp duty on the value of the part transferred back will be payable.
An argument might be accepted by the revenue office to mark the transfer back pursuant to the contract as not liable to stamp duty. This may be possible if the contract for the transfer to the son attaches the subdivision showing the part that will be retained by the son and the part that will be transferred back to the father, and the consideration is said to be for the part the son is retaining.
Mentor suggests proceeding in this manner as the result can be no worse than proceeding with two contracts.
Regards
Mentor
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