A transfer of land pursuant to a partition agreement can have the benefit of attracting nil or minimal stamp duty. The concept is that, where property is jointly owned as tenants in common in whatever shares, those registered proprietors can, after the subdivision of that land, take real estate to that proportionate value free of value.
An example: A & B buy a property as tenants in common in equal shares. They build 2 identical factories (of identical value) on that property and enter a partition agreement which will allow them to transfer one factory to each party free of duty.
If factory 1 was worth 40% of the combined post development value of the two factories and factory 2 was worth 60%, A can take factory 1 without duty and B must pay duty on the dollar value of the difference between the value of factory 2 and 50% of the combined value of factory 1 and factory 2.
However, whilst such arrangements have advantages of reducing stamp duty, recent taxation decisions indicate that such arrangements might attract GST and Capital Gains Tax. Accordingly, you should obtain the advice of your professional taxation advisor before committing to a partition agreement.
ASAP Lawyers regularly accepts instructions to draft and advise on partition agreements. Contact us on 03 9450 9400 to make an appointment for a consultation.
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