Is There Stamp Duty on a Gift or an Inheritance?

Two questions that sound similar and have opposite answers. Giving property away during your lifetime is a dutiable event. Passing it on when you die, through a properly administered estate, generally is not.

Gifts and settlements are dutiable

Division 7 of Part III of the Stamp Duties Act (Chapter 117) deals with deeds of settlement and deeds of gift. Section 59 charges duty on settlements and gifts, and Schedule 1 carries item 8 (gift, deeds of) and item 14 (settlement, deeds of).

The supporting machinery:

• Section 61 — deeds of settlement or gift.
• Section 62 — several instruments constituting deeds.
• Section 63 — instruments in favour of objects of certain powers of appointment.
• Section 64 — deduction of mortgage debt on assessment of duty.
• Section 65 — production of deeds and statements of particulars.
• Section 66 — assessments on deeds; section 67 — failure to appear.

Inheritance: the exemptions

Item 5 of Schedule 1 — conveyances or transfers on sale of real property — carries exemptions that matter greatly to families.

Exemption 10 exempts conveyances or transfers of real property made:

• in pursuance of deeds of settlement or deeds of gift that have been duly stamped; or
• to beneficiaries under wills, or in pursuance of letters of administration of a deceased person's estate.

Exemption 11(b) exempts a transfer to an executor or administrator of a deceased person's estate, for the purpose of administering the estate.

Item 16 carries equivalent exemptions for marketable securities transferred under duly stamped deeds of settlement or gift, or to beneficiaries under wills or letters of administration.

“Duly stamped” is doing work

Notice the wording of exemption 10: transfers in pursuance of deeds of settlement or gift that have been duly stamped. The exemption for the transfer depends on the underlying deed having been stamped.

So a family that made a gift by deed years ago and never stamped it does not simply enjoy the exemption on the later transfer. Duty and accumulated penalty on the original deed have to be dealt with first.

Trustee transfers

Exemption 6 to item 5 covers a conveyance by a trustee to the beneficiary of the trust, otherwise than for valuable consideration and not in breach of trust, where stamp duty on the prior conveyance has been paid or was not payable, and the Collector does not regard it as part of a duty-avoidance scheme.

Exemption 11(a) covers transfers on the retirement of a trustee or appointment of a new trustee, subject to conditions: no continuing or new trustee is or can become a beneficiary, the transfer is not part of a scheme to confer an interest to the detriment of a beneficiary, and it is not connected with a tax avoidance scheme.

Other exemptions worth knowing

• Marriage settlements (item 5, exemption 3).
• Transfers to or in trust for registered friendly societies, or bodies associated for religious, charitable, recreational or educational purposes (exemption 4), including instruments declaring the trusts or appointing new trustees.
• Grants from the State of land in the country (exemption 1).
• Instruments dealing with property outside the country, to the extent they relate to that property (exemption 5).

Customary land

The Act charges duty on instruments. Customary land in Papua New Guinea passes according to custom, generally without a dutiable instrument and without registration — it is not the deceased's to give by will. See when someone dies and customary land explained.