Transfer of ownership: How to change property titles
Changing property ownership between spouses or other co-owners is relatively straightforward, but there are a few steps involved. Here's what you need to know.
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There are a number of reasons why people look into changing property titles' names. You might have shared ownership between high and low income earners, and you want to spread the capital gain and income tax liabilities. Or perhaps there's been a relationship breakdown, and one co-owner is transferring the property to the other?
Knowing the different types of ownership structure is important to help you work out how to transfer ownership. This guide to changing property ownership will help you determine which property ownership structure best suits you and how to move forward with a transfer of ownership.
If you need expert help navigating title changes and property ownership questions you should consider speaking to a conveyancer or solicitor. They can help you with issues related to ownership and property law.
Types of ownership structure
- Outright ownership. In this structure you are the sole owner of the property. Your name alone is on the deed and are responsible for the property. The property is likely to be owned in your own personal name.
- Joint tenants. Here you own the property equally with someone else. Together you both have full ownership of the property. One joint tenant cannot pass their share onto another person when they die; it automatically passes instead to the other joint tenant.
- Tenants in common. Two or more people own specified portions of the property. This can be a 50/50 split, or 70/30, or any other combination. Each owner has their own rights to their share and can sell it to others, or offer it in a will to someone else. The other tenants in common don't have an automatic right to the whole property.
- Trust ownership. This is where the property is owned and managed by a trust or another figure. A trust is an entity which holds assets in trust on behalf of its beneficiaries. There are a number of trust types around, although the most commonly seen are family trusts. These are useful for when property is being left to younger family members.
- Company ownership. You can also own property through a company. This isn’t the best setup for the small investor, because profits are taken up by business taxes and income tax should you wish to take a wage from the investment. On the other hand, it could be beneficial if the owner’s tax rate is over 30% because the company will pay less tax. This all assumes it is an investment property and not the owner’s principle place of residency, in which case the owner would not pay any capital gains tax on a sale.
Why change the property ownership?
There are many reasons people may want to change the ownership details of the property they range from a change in circumstance or situation all the way to gifting to a family member or inheritance. Below is a list of the most common reasons people have for changing property ownership:
- Divorce. When you purchase a property as part of a relationship and that relationship breaks down you will want to make changes to the details of ownership.
- Change ownership structure. You may have originally chosen an ownership structure that no longer is relevant for you and anyone you may own the property with.
- Family reasons. The owner of the property may have become quite ill or unable to properly look after their own affairs in order, they have decided to pass the property onto a family member or the owner may have died. All these situations would require that the family make changes to the ownership.
- Change in circumstance. A property may have been purchased with the assistance of a friend or family member or as a joint purchase and now there has been a change in financial circumstance that allows one owner to buy the other out.
Costs of changing ownership
- Stamp duty. Changing property ownership will incur stamp duty, which will be calculated based on the valuation of the land. Usually it is between 3 - 5.5 per cent. In some states like Victoria, stamp duty can be waived. Find out more here.
- Capital gains tax (CGT). Selling or transferring ownership may incur a CGT. If the sale involves an investment property, then the seller will need to pay CGT. As a general rule, it is 25% of the capital gain. Read more about Capital Gains Tax.
- Fees. When you sell or transfer the title of a property, you change the conditions of the mortgage, which may incur break fees. If you require a lawyer, there may also be legal fees and valuation fees.
Steps involved in changing property ownership
There are a few steps involved in changing the ownership details of a property and these vary depending on the type of property ownership, how you are changing it and whether it is under a mortgage. Below are some of the key steps involved.
1. Check the mortgage. If the property still has a home loan attached to it you will need to have the details of this on hand as they may also need to be adjusted depending on your reason for making a change to the property ownership.
2. Get a copy of the property title. You can contact your local state office that looks after land titles for a copy of the properties title as a reference for changing the details.
3. Fill out a property title transfer form. This can be gotten from your government agency that looks after land titles for the form/s required to change the property ownership. You can also ask them for instructions on how to properly fill this out, alternatively if you are in NSW read our guide here.
4. Submit the title transfer form. Once you have completed the form with all relevant details you will need to submit it to your local state government land office that looks after property titles.
5. Pay the relevant fee. Any change of title or adjustment to property ownership will incur a fee to be paid to the relevant state government office.
6. Wait for the processing of the form. The relevant agency will then process the form and if all is well will make the relevant adjustments to the ownership details held by the state.
If you have a mortgage still attached to the property you will need to notify your bank of the change to property ownership and they may ask you to alter your loan documents to match the property title details.
Beware of tax legislation
There are anti-tax avoidance rules that state you must have a valid reason for transferring the title of a property apart from tax benefits. Be sure you know your reason and be certain to document it.
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