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If you receive a property as part of a relationship property agreement, you will not pay tax on the property when it's transferred to you. However, you may need to pay tax on any profit when you sell it.

If you later sell the property within the bright-line period that applies from the date it was first owned in the former relationship, you will pay tax on any profit you make unless it is your main home.

The bright-line test may also apply if you transfer a share in the property to a new partner. If you both, as joint owners, sell the property within the bright-line period your partner may have to pay tax on the profits of their share if the property is not their main home.

Example: Emily and Carl's property transferred to Carl

After saving for 5 years, Emily and Carl buy their first investment property and the property's title is registered to them in November 2021. 12 months later they separate. In December 2023 the property is transferred into Carl’s name as part of their relationship property agreement. In July 2024 Carl sells the property for more than the original purchase price.

The transfer of Emily’s share to Carl in December 2023 has no tax liability. Carl’s subsequent sale does not have a tax liability as the sale is outside of 2 years of the original bright-line start date of November 2021.

Example: Sam gives Bobby a half-share in his main home

When Sam and his partner Jenny split up in 2020, their rental property is transferred to Sam as part of the relationship property agreement.

On 7 May 2023 Sam transfers a half-share in the property to his new partner Bobby. Bobby has another home that is her main home. On 7 July 2024 they decide to sell the property.

Because Bobby has owned her share of the property for only 14 months which is less than the applicable bright-line period of 2 years, and it's not her main home, she must pay income tax on her share of the profit from the sale.

As the property was Sam’s main home, he does not need to pay tax as the main home exclusion applies to his share.

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Last updated: 21 Jun 2024
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