Tax Tip 236: Stamp duty and Partition of Land in VIC after settlement

In Victoria 2 or more joint owners can partition land and the change titles without stamp duty as long as their ownership amounts do not change.

S27 Duties act 2000 (Vic) DUTIES ACT 2000 - SECT 27 Partitions of land


Example

Homer and Ned are neighbours and want to purchase a block of land, build 2 houses on it and then subdivide it.

They settle on the land as joint tenant owners in equal shares.

They partition the land so that after the partition Homer will own the beneficial interest in Block A and Ned the beneficial interest in Block B. But the blocks turn out to be valued different to each other. Homer’s is valued at say $500,000 and Ned’s at $400,000 when the land was purchased at $900,000.

This will mean Homer will need to pay more stamp duty on his Block at when ownership is separated. As they were 50/50 owns at purchase Homer’s portion of the land was valued at $450,000. The partition is giving him a share higher than his initial interest. So he would pay duty on $50k. Ned’s interest is less, so there is no extra duty to pay, but he gets no refund.


The key here is the buy the land in the percentages that will be equal to the final values when split.


Note that this might still trigger CGT and possibly GST which both have to be treated separately.

 

One of the important matters people should consider with partitioning is that its something they generally dont know about but by seeking legal advice on unusual changes to title there can be exemptions etc. So but seeking early legal advice they may utilise a benefit. The best time for that legal advice is the earliest possible date and PRIOR to acquisition. Sorting things out later is always a poor choice.

 

I should point out that partition after can result in CGT as a CGT event will be triggered generally.

 

Thanks @Terry_w Really helpful WRT to Stamp Duty.

How will the CGT be calculated in the example that you have given - lets assume the purchase price + improvement costs are $600,000?

Will definitely be seeking legal advise

 

Unless there is a trust relationship from the beginning it will be a CGT trigger