Transferring Property to Family or Friends in NSW
Every few weeks someone sits down with us and says some version of the same thing: we'll just sell the house to our daughter for a dollar. It feels like it should work. It doesn't, and the reasons cost real money if you find them out after the transfer instead of before.
Here's how transferring property to a family member in NSW actually works: when duty applies, the genuine exemptions, the tax and Centrelink consequences people miss, and what the process involves. This is general information rather than advice on your situation, but it will show you the right questions to ask.
The $1 sale myth
In NSW, transfer duty on related-party transfers is calculated on the property's market value or the price paid, whichever is higher. Gift the property, sell it for $1 or sell it for half its worth, and Revenue NSW assesses duty as if it changed hands at full market value. To make that stick, a valuation from a registered property valuer is required for these transfers; you don't get to nominate the number.
So the starting assumption for any family transfer should be that duty is payable at full rates, unless one of the specific exemptions below applies.
When transfer duty is exempt in NSW
The exemptions are narrow but genuinely valuable where they fit:
• Spouses and de facto partners: transferring the family home so it's held jointly or in equal shares between married or de facto partners can be exempt from duty
• Relationship breakdown: transfers made under a court order or binding financial agreement after a marriage or de facto relationship ends are generally exempt
• Deceased estates: property passing to a beneficiary under a will or the intestacy rules is subject only to nominal duty of $100.00
• Family farms: transfers of primary production land between family members can be exempt, and since a 2022 law change this can extend to farms held through a family company or trust, with conditions attached
Notice what's not on the list: gifting a house to your adult children, transferring an investment property to your brother, and every transfer to a friend. Those attract duty on market value, full stop.
Capital gains tax: the layer people forget
Duty is a state tax on the person receiving the property. Capital gains tax is a federal tax on the person giving it away, and it doesn't care that no money changed hands. Under the ATO's market value substitution rule, a gift or below-market sale to a related party is treated as a disposal at full market value, and the giver pays CGT on the gain accordingly.
The big exception is the main residence exemption: if the property has been your home throughout your ownership, the transfer is generally CGT-free. Gift an investment property, though, and you can trigger a very real tax bill for giving something away. This is where legal and accounting advice need to work together before anything is signed.
The Centrelink trap
For older parents, this one bites hardest. Services Australia applies gifting and deprivation rules to below-market transfers: give away more than the allowable gifting amounts and the excess is still counted as your asset for five years when your pension or aged care position is assessed. Transferring the house to the kids does not make it disappear from the means test.
None of this makes a family transfer a bad idea. It means the timing and structure need to be planned against your pension and aged care position, not discovered by a Services Australia review afterwards.
Transferring property to friends
Friends get none of the family exemptions. A transfer to a friend is treated like any other sale: duty on market value, CGT for the giver, and a registered valuation to support the figures. The bigger risk with friends is looser paperwork. If money is being lent, repaid over time, or contributed unevenly, that arrangement needs to be documented properly, because the friendships that end up in litigation are the ones that relied on a handshake.
A deed recording exactly what was agreed costs little against what an ownership dispute costs, in both dollars and Christmas lunches.
How the transfer process works
A properly handled family transfer in NSW runs broadly like this:
Advice and assessment: the relationship, the property, any mortgage, and the duty, CGT and Centrelink position are worked out before anything is prepared
Valuation: where duty is payable, a registered valuer's report is obtained for Revenue NSW
Transfer documents: the transfer is prepared, along with any deed of gift or agreement recording the arrangement
Duty assessment: the transfer is lodged with Revenue NSW for assessment, or the exemption application is prepared and lodged
Lender consent: if there's a mortgage, the lender must consent or the loan must be refinanced or discharged
Settlement and registration: the transfer is completed electronically and the new ownership registered
Allow six to eight weeks for a straightforward transfer, longer where lenders or exemption applications are involved. Our conveyancing team handles each of these steps, and the free first consultation is where we map which of them apply to you.
Frequently Asked Questions
Can I gift my house to my child without paying stamp duty in NSW?
Generally, no. Transfers from parents to children don't qualify for a duty exemption, so Revenue NSW assesses duty on the property's full market value even though it's a gift. The main exemptions cover spouse transfers of the family home, relationship breakdowns, deceased estates and family farms, and none of those covers an ordinary gift to adult children.
Do I pay capital gains tax if I gift my home to family?
If the property has genuinely been your main residence for the whole time you've owned it, the main residence exemption usually means no CGT on the transfer. Gift an investment property, holiday house or inherited property you didn't live in, and CGT is assessed as if you sold it at market value. Get tax advice before you commit, not after.
Will transferring my home to my children affect my pension?
It can, significantly. Centrelink's gifting and deprivation rules mean value given away above the allowable gifting amounts is still counted in your assets test for five years. If the transfer is part of pension or aged care planning, the order and timing of steps matter enormously, so take advice on your Centrelink position as part of the transfer, not separately.
Do we really need a lawyer for a transfer between family?
The transfer itself is paperwork, but the traps around it aren't: duty assessments and exemption applications, valuations, CGT positions, lender consent where a mortgage exists, and recording the deal so nobody's memory of it differs in ten years. A solicitor's job on these matters is making sure a generous decision doesn't become an expensive one.
How long does a family property transfer take in NSW?
Plan on six to eight weeks for a straightforward transfer once the decision is made, covering the valuation, documents, duty assessment and registration. Transfers involving mortgages, exemption applications or estate matters take longer. Starting with advice early is the single best way to keep the timeline short.
Thinking about transferring property to family or friends? Cassab & Associates Solicitors has handled property matters in Bankstown and Sydney's south-west for more than 35 years. Book a free consultation on (02) 9793 2700 and we'll tell you straight what your transfer involves.