A Binding Financial Agreement, also known as a BFA, is a legal document that outlines the financial arrangements between two parties in the event of a separation or divorce. The purpose of a BFA is to protect both parties’ assets and financial interests, and to provide a clear understanding of how financial matters will be managed in the event of a relationship breakdown.
One important consideration when drafting a BFA is the impact of stamp duty. Stamp duty is a tax imposed by state and territory governments on certain transactions, including the transfer of property. When parties to a BFA own property, it is important to understand the potential stamp duty implications of the agreement.
In general, a BFA that transfers property from one party to another may be subject to stamp duty. The amount of stamp duty payable will depend on the value of the property being transferred and the jurisdiction in which it is located. For example, in New South Wales, stamp duty is calculated as a percentage of the property’s value, with rates ranging from 1.25% to 7% for properties valued at more than $3 million.
However, there are some circumstances in which stamp duty may be avoided. For example, if the transfer of property is made pursuant to a court order, no stamp duty is payable. Additionally, if the transfer of property is made pursuant to a BFA, stamp duty may be avoided if certain criteria are met.
To avoid stamp duty on a transfer of property pursuant to a BFA, the agreement must be considered a “genuine agreement” by the relevant state or territory revenue authority. This means that the BFA must satisfy certain requirements, such as being in writing, signed by both parties, and containing a statement to the effect that the parties intend the agreement to be binding.
It is important to note that the rules regarding stamp duty and BFA’s can vary between states and territories, and it is essential to seek legal advice to ensure compliance with local laws.
In conclusion, a Binding Financial Agreement is an important tool for protecting the financial interests of parties to a relationship. However, it is important to consider the potential stamp duty implications of such an agreement, particularly where property is involved. By understanding the rules governing stamp duty and BFA’s, parties can make informed decisions about how to manage their financial affairs in the event of a separation or divorce.