Gifting property to family in Australia: the stamp duty, CGT, and 'love and affection' rules

Australia has no gift tax, which leads parents to assume they can transfer a property to a child for $1 and walk away. They cannot. The ATO treats every related-party transfer at market value for CGT, and state revenue offices charge stamp duty on the same market value. The parents end up writing two cheques to government for a property they intended to give away free.

The mechanics are not hidden. They sit in section 116-30 of the Income Tax Assessment Act 1997, in each state's duties act, and in the Centrelink gifting rules. The trap is not legal complexity. It is that the documents people sign look like a sale to nobody for no money, and the tax authorities look straight through them.

The four regulatory layers

A related-party transfer of Australian residential property passes through four distinct rule sets, each with its own authority and its own invoice.

• Federal CGT (the ATO). Section 116-30 ITAA97 deems a transaction between non-arms-length parties to take place at market value. The transferor is treated as having sold at market value regardless of what the contract says. A gain is taxable in the year of transfer. The main-residence exemption can wipe the gain out if the transferor lived in the property the whole time they owned it; for an investment property, it does not.
• State stamp duty. Every state and territory charges duty on the market value of the transfer, not the contract price. Revenue NSW, the Victorian SRO and their counterparts require a sworn valuation or independent appraisal for any transfer between related parties. A $1 contract gets duty assessed on the $800k valuation.
• Land tax. Continues after the transfer, based on the new owner's total land holdings across the relevant state. A child who already owns one investment property and receives a second through a gift can cross the land-tax threshold the year of the transfer.
• Centrelink gifting rules. If the transferor is on the age pension or another means-tested payment, the gift counts as a deprived asset above $10,000 in any year or $30,000 over five years. The pension is reduced as if the gifted equity were still owned for five years from the transfer date.

The 'love and affection' myth

Family transfer documents often record the consideration as "natural love and affection". The phrase is ancient contract-law language used to validate a transfer for which no money changes hands. It is a formality that keeps the deed enforceable. It is not a tax exemption. Revenue offices ignore it; the ATO ignores it. A transfer on those words still attracts duty at market value and still triggers a CGT event for the transferor.

The same applies to the "sale for $1" structure sometimes suggested by well-meaning relatives. The price on the contract is not the tax base. Revenue NSW and every other state office require a valuation report on any transfer at undervalue between related parties and assess duty on the higher of contract price or market value. ATO Section 116-30 deems the CGT event at market value regardless. Transferring at undervalue also opens creditor-defeating disposition and family-law claw-back questions that a $1 contract does nothing to address.

Where the exemptions actually apply: state by state

A narrow set of family transfers do get duty relief. The common thread is spouse-to-spouse transfers of a principal place of residence, and certain transfers under deceased estates or court-ordered family-law settlements. Parent-to-adult-child gifts are not on the list anywhere.

• NSW. Spouse-to-spouse PPOR transfer is exempt from duty. Parent-to-child has no general exemption; full duty is payable on the market-value assessment. See the NSW stamp duty walkthrough for the bracket arithmetic.
• VIC. Spouse-to-spouse PPOR transfer is exempt. Parent-to-child transfers are dutiable at full market value with limited deceased-estate concessions.
• QLD. Spouse-to-spouse PPOR is exempt. Distributions from deceased estates to a beneficiary named in the will receive specific concessions; gifts outside that structure do not.
• WA. Transfers between spouses or de facto partners are exempt under Duties Act provisions. Distributions from a deceased estate to a beneficiary are also exempt where the transfer follows the will or the rules of intestacy.
• SA, TAS, ACT, NT. All four have spouse-PPOR exemptions broadly aligned with the larger states. Parent-to-child gifts attract full duty in each.

When a family transfer can work tax-efficiently

Three structures do clear both the CGT and duty layers cleanly. Each has narrow eligibility, and the paperwork is unforgiving.

• Spouse-to-spouse transfer of a principal residence. Duty exempt in every state when the property is the couple's shared PPOR. CGT rollover under Division 126 ITAA97 applies if the receiving spouse continues to use the property as their main residence. The cost base transfers across.
• Deceased estate distribution. A beneficiary inherits the deceased's cost base under the CGT inheritance rules; no immediate CGT event arises on the transfer from estate to beneficiary. Stamp duty is concessional or exempt in most states where the transfer follows the will.
• Family Law Act property settlement. Court-ordered or binding-financial-agreement transfers attract a CGT rollover under section 126-5 ITAA97 and duty exemption in every state when the transfer follows a section 90B or 90C agreement. The divorce and property settlement guide covers the mechanics.

Where it fails: the common scenarios

Outside those three structures, related-party transfers run straight into both invoices. The patterns that catch families most often:

• Parent to adult child, investment property. Full CGT for the parents on the gain since acquisition. Full stamp duty for the child on the current market value.
• Spouse to spouse, investment property. Duty often payable because the PPOR exemption does not apply. CGT rollover under 126-5 can apply for genuine spouse-defined transfers but the ATO scrutinises structures used purely to shift rental income to a lower-bracket partner.
• Sibling or other-relative transfer. No general exemptions anywhere. Full duty, full CGT.
• Transfer into a trust or company controlled by family. Treated as a sale to a separate entity at market value. CGT event, full duty, and the ongoing land-tax consequences of holding through a discretionary trust. The buying in a trust article covers the trade-offs before that decision.

A worked example: NSW parents gifting a $800k unit

Take a couple in their sixties who bought a Parramatta investment unit in 2010 for $350,000. They want to gift it to their adult daughter, current market value $800,000. The unit has been rented the entire time, so no main-residence exemption is available.

CGT side, for the parents. Section 116-30 deems the disposal at $800,000 market value. Gross capital gain is $450,000. Held longer than twelve months, so the 50% individual discount applies, taking the taxable gain to $225,000. Split evenly across the two owners that is $112,500 each. At a top marginal rate of 47% (45% plus the 2% Medicare levy) the combined household CGT bill comes to $105,750. Model it against your own cost base on the CGT calculator; the full CGT worked example runs through the bracket arithmetic.

Stamp duty side, for the daughter. Revenue NSW assesses duty on the $800,000 market value, not the $1 contract figure. On the 2026 NSW residential schedule the duty on an $800,000 investment property lands at roughly $31,090. If the daughter is a foreign resident, an 8% surcharge of about $64,000 brings her bill closer to $95,000. The stamp duty calculator will produce the live number for the current schedule and surcharges.

Combined household cost of the "free" transfer, for a domestic-resident daughter: $105,750 in CGT plus $31,090 in duty equals $136,840 of government cheques. For comparison, if the parents sold the unit to an arms-length buyer at $800,000 they would pay the same $105,750 in CGT but they would walk away with $694,250 of net cash. Gifting cash from that pile to the daughter attracts no tax. The family is materially better off selling and gifting the proceeds than gifting the property itself.

What to do before signing anything

Three checks save most of the avoidable damage.

• Commission an independent valuation. Revenue offices require one for any non-arms-length transfer, and it is the document the ATO will look at if the CGT return is audited. A bank-panel valuer or a registered sworn valuer is what they accept.
• Get advice from a tax agent who has seen related-party property transfers before. The structuring choices (joint tenants vs tenants in common, partial transfer, retained life interest) materially change the tax outcome.
• Engage a conveyancer or solicitor early. The deed, stamping submission and title transfer all need to be synchronised, and getting the order wrong can trigger double duty. The conveyancer-vs-solicitor primer covers which to pick for a transfer that has a tax element rather than a clean purchase.

The short version

Australia's lack of gift tax is real but narrow. It means a parent who gives cash to a child pays no tax on the gift itself. It does not mean a parent who transfers a property pays no tax. The federal CGT system and the state duty systems both step in at market value, and the contract price is irrelevant to either. The structures that do work, spouse PPOR transfers, deceased estates, Family Law Act settlements, are defined narrowly and have their own paperwork. Everything else gets billed at full rates by two governments who never spoke to each other about it.