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Vic stamp duty: property in children's names transferred to parents – no duty exemption

by Lisa Lynch

The Victorian Civil and Administrative Tribunal has affirmed a stamp duty assessment issued to husband and wife taxpayers (parents) in relation to the family home transferred to them by their children.

On 25 September 1995, the children (2 young adults) signed a contract to purchase the property for $505,000. The family all lived in the home from 1998 until the children completed their studies – the last child moved out of home in 2008. Subsequently, the Commissioner issued land tax assessments for the 2009 and 2010 land tax years. The children objected to the assessments arguing that they held the property on trust for their parents and that the property was their parent's principal place of residence.

Following the Commissioner's disallowance of the objections, on 16 December 2010, the children executed a transfer of land in relation to the property in favour of their parents. The consideration was referred to as "entitlement in equity". The parents had the property appraised with a value of between $3.5m to $4m. Based on those figures, the Commissioner assessed duty of $206,250.

The issue before the Tribunal was whether s 34(1)(b) of the Duties Act 2000 (Vic) applied to exempt from duty the transfer of the property. This turned on whether the parents "provided the money for the purchase of the dutiable property".

The Tribunal heard details of dividends paid to the children by a Malaysian company and various sums deposited and withdrawn from the children's bank accounts during the 1990s. The taxpayers claimed the money for the purchase of the property was all paid for by themselves from either "cash reserves" or proceeds from the sale of other properties. However, the Tribunal was not satisfied that the parents "provided the money for the purchase of the dutiable property" for the exemption under s 34(1)(b) to apply. (Lim v Comr of State Revenue (Taxation) [2012] VCAT 1469, Victorian Civil and Administrative Tribunal, Davis SM, 27 September 2012.)