Transfer duty exemption: divorce transfers and deceased estate transfers to spouses
The Transfer Duty Act was amended with effect from 25 July 2006 to provide for an exemption from transfer duty in respect of transfers between divorced spouses.
Due to some uncertainty about the effective date and the scope of application, it is useful for us to again consider the precise wording and nature of the section.
The amendment also rephrased the exemption applicable to spouses acquiring property from the estates of their deceased spouses. The exemption for transfers to spouses in deceased estates and divorces is now combined into one exemption clause. Previously there was an exemption for spouses acquiring property in any manner from a deceased spouse's estate, while there was no exemption for divorce transfers.
For ease of reference, I quote the applicable amendment section. It is contained in section 16 of the Small Business Tax Amnesty and Amendment of Taxation Laws Act 9 of 2006, published in GG 29068, Notice 749, on 25 July 2006.
The section to be amended is section 9(1)(i) of the Transfer Duty Act, while section 9(1)(f) is deleted. The exemption reads:
"a surviving or divorced spouse who acquires the sole ownership in the whole or any portion of property registered in the name of his or her deceased or divorced spouse where that property or portion is transferred to that surviving or divorced spouse as a result of the death of his or her spouse or dissolution of their marriage or union."
Scope of application
To qualify for the exemption, the following requirements must be met:
- the sole ownership in the whole or any portion
- of the property registered in the name of the deceased or divorced spouse
- must be acquired
- by the surviving spouse or the other divorced spouse;
- the transfer must be the result of the death or dissolution of the marriage 'or union', as the case may be
Example: X owns a half share in Erf 123 (his brother owns the other half). X is married to Y out of community of property. In the settlement agreement relating to a divorce, it is agreed that Y will get X's half share in Erf 123. This transfer will be exempt in terms of section 9(1)(i) of the Transfer Duty Act.
In the case of divorce where there is a settlement agreement, when has the property been 'acquired' by the spouse - on date of signing of the settlement agreement or on date of the court order?
It is debatable, and two possibilities exist. I favour point (2) discussed below.
(1) The date of acquisition is the date that the order of divorce is granted
. The signing of the settlement agreement is in anticipation of the divorce and cannot itself be said to constitute the acquisition. If the divorce order is never granted, the settlement agreement never comes into effect.
(2) The date of signing the settlement agreement is the date of acquisition
. One could argue that this situation is analogous to the signing of a conditional agreement of sale; even though there are conditions, the 'date of acquisition' for transfer duty purposes is the date of signature.
When does this new amendment take effect?
I initially thought that the amendment was effective from 1 March 2006, due to the wording of section 62 of the amendment Act. Dana van Zyl of Smith Tabata Buchanan Boyes has persuaded me that my interpretation is incorrect, and I now agree that the effective date is the date on which the amendment was published, namely 25 July 2006.
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