Guide to Partitions in New South Wales
What is a Partition?
A partition is the legal process of dividing co-owned land in NSW, held as joint tenants or tenants in common, into separate lots owned individually by the co-owners. This often follows a subdivision, allowing each party to hold title to their allocated portion.
It involves transferring or agreeing to transfer the property to one or more co-owners, ensuring clear ownership separation. Partitions are common in developments where co-owners subdivide land for individual use, sale, or inheritance.
Steps for a Partition
A Deed of Partition is a crucial agreement documenting the intended ownership split and allocation of property after a post-subdivision. It helps to enforce the agreement of the parties once subdivision has occurred and provides evidence to Revenue NSW of the parties' intentions, minimising unexpected tax outcomes. To draft one effectively:
- Consult a Law Firm: Engage experienced property lawyers early to assess your situation, ensure compliance with NSW laws, and draft the deed. Your lawyers will prepare the deed outlining ownership percentages, lot distributions, and responsibilities. RMB Lawyers specialises in partition agreements and can guide you through complexities to avoid unexpected pitfalls.
- Lodge Subdivision Plan: Work with surveyors and councils for approvals, then lodge the plan with NSW Land Registry Services (LRS).
- Obtain Valuation: Once the land has been subdivided, co-owners must obtain an independent valuation from a certified valuer for each parcel to determine values and support stamp duty calculations.
Finalising the Partition
Once the subdivision is certified by LRS, the partition is finalised through electronic conveyancing on PEXA (Property Exchange Australia). This involves lodging transfers (e.g., part tenancy transfers) to update titles. Our firm handles this step, preparing and executing documents in PEXA, arranging stamp duty, balancing financials, and ensuring registration.
Stamp Duty Implications
Stamp duty on partitions is heavily reduced if structured correctly. Owners must provide an independent valuation from a certified valuer for each parcel. Duty is calculated on the excess by which the value of the transferred parcel exceeds the co-owner's prior interest, or any consideration paid—whichever is greater.
For example, ABC Pty Ltd and XYZ Pty Ltd co-own a property which has now been subdivided into Lot 1 and Lot 2. At this point in time both parties own a 50/50 share of each Lot. The parties agree to partition the land so that ABC Pty Ltd will wholly own Lot 1, and that XYZ Pty Ltd will wholly own Lot 2. An independent valuation identifies that Lot 1 is worth $600,000 whilst Lot 2 is worth $700,000. Lot 1 is only required to pay concessional stamp duty of $100. Lot 2 however, is also required to pay stamp duty on the extra $50,000 of interest that they have gained.
If the property values were equal however, only $100 stamp duty would be payable by either party.
Proper documentation via a Deed of Partition can help to minimise your stamp duty liability. For personalised advice, you can contract RMB Lawyers to help guide you through the partition process.