Property Tax Dispute
The parties involved have jointly owned a property for several years under joint tenancy. There is an outstanding land tax liability of approximately AUD 90,000 on this property, and one party is proposing to resolve the issue by transferring ownership to them. However, they have not agreed to sign any legal documents to take on the tax liability. One party is concerned about the risk of unpaid taxes after the transfer and is exploring options such as selling the property instead. Currently, both parties are residing outside of Australia, and the property's market value is estimated at around AUD 3,000,000.
Questions about this case
These answers have been verified by a lawyer in the LEAP networkWhat are the potential legal risks of transferring the property without a written agreement regarding the outstanding taxes?
Transferring the property without a written agreement exposing you to financial risk. If the other party does not pay the pending taxes, you might still be liable, leading to possible penalties or enforcement actions. Additionally, the absence of a formal agreement means there is no legal requirement for them to uphold their verbal commitments, complicating matters further given your non-resident status.
What steps can I take to protect myself if the outstanding taxes are not paid following the property transfer?
To protect yourself, consider including a clause in the transfer agreement stipulating that the transfer is contingent upon the taxes being paid. You might also request a declaration from the other party committing to settle the tax liabilities or file a caveat on the property to prevent further transactions until the taxes are settled.
What tax liabilities should I be aware of if I proceed with the transfer under these circumstances?
Transferring the property may trigger capital gains tax obligations. Even without monetary exchange, the transfer is viewed as a capital gains event by authorities, potentially incurring liabilities based on the market value of the property share. Furthermore, not addressing the outstanding land tax could lead to penalties.
What are the important steps to ensure the property transfer is legally sound and enforceable?
To ensure the property transfer is legally binding, you should have a detailed written agreement documented and signed by both parties, consult a solicitor for guidance, consider obtaining consent orders from relevant courts to formalize the settlement, appropriately register the transfer with land authorities, and seek tax advice concerning your obligations as a non-resident.
Are there alternative options to resolve this issue without transferring ownership of the property?
An alternative to transferring ownership could be to jointly sell the property, allowing both parties to settle the tax liabilities and share any remaining proceeds. This might simplify tax obligations given the circumstances of both parties residing abroad.
