Stamp Duty on Deceased Estates in Victoria: The Section 42 Exemption Explained

Stamp duty is typically associated with buying a property — a tax on the purchase price. But it can also apply when property changes hands within a deceased estate, and many Victorian families are caught off guard by a bill they didn't see coming.

Understanding Section 42 of the Duties Act 2000 (Vic) — and, more critically, understanding what makes the exemption fail — is essential before any property in a Victorian estate changes hands.

The General Rule: Transfers to Beneficiaries Are Exempt

Under Section 42 of the Duties Act 2000 (Vic), the transfer of real property from an executor to a beneficiary is generally exempt from stamp duty in Victoria. No duty is payable when:

1. The transfer is made by the executor (or administrator) to a beneficiary
2. The transfer strictly conforms to the terms of the will (or the intestacy rules, if there is no will)
3. There is no valuable consideration — that is, the beneficiary is not paying the executor or any other person for the property

This exemption applies to the most common scenario: a parent dies, leaves their home to an adult child in their will, the executor transfers the title to that child. No stamp duty applies.

The same exemption covers transfers under intestacy — for example, if someone dies without a will and the estate is distributed according to Victoria's statutory rules, those property transfers are also exempt from duty.

What Breaks the Exemption

The exemption sounds straightforward. In practice, families lose it by trying to be practical.

Deeds of Family Arrangement

This is the most common trigger for unexpected stamp duty in Victorian deceased estates.

A Deed of Family Arrangement (DOFA) is a legal agreement between beneficiaries to redistribute what they receive from the estate differently from what the will specifies. For example:

• A will divides the estate equally between two siblings — 50% of the house and 50% of the cash each. The siblings agree: one takes the whole house, the other takes all the cash.
• Or: a will leaves the house to three adult children equally, but one child agrees to buy out the others' shares.

These rearrangements seem sensible. But when property changes hands in a way that does not strictly follow the will, the State Revenue Office (SRO) examines the transaction closely.

The SRO applies either an "Each Asset" test or an "All Assets" test under its Ruling DA-051. If a beneficiary receives real estate that exceeds their proportionate entitlement to the residuary estate — even by agreement with other beneficiaries — stamp duty applies to the excess value at the standard rate.

In a high-value Victorian property market, the excess can be hundreds of thousands of dollars. The stamp duty on that excess can easily run to tens of thousands.

Valuable Consideration

If any money changes hands between beneficiaries in connection with a property transfer, the transaction is no longer a simple estate distribution. It becomes a purchase. The exemption disappears, and full stamp duty applies to the amount paid.

This catches families who reach informal agreements — "I'll take the house, you take the superannuation, and I'll pay you $50,000 to make it fair." That $50,000 payment converts a duty-exempt transfer into a dutiable transaction.

How to Claim the Exemption

Transferring property from a deceased estate is not automatically stamp duty-free — you must actively claim the exemption with the SRO.

The process involves:

• Filing a Duties Online form through the SRO's digital portal
• Attaching a certified copy of the Grant of Probate or Letters of Administration
• Providing a copy of the will
• Completing a statutory declaration confirming that the transfer is in strict accordance with the will and that no consideration has been paid or agreed upon

The executor or their conveyancer typically handles this as part of the PEXA property transfer process. But the statutory declaration is critical — any inaccuracy or omission can trigger an SRO audit.

Transfers Under Intestacy

If the deceased died without a will, property transfers to beneficiaries according to Victoria's intestacy rules under the Administration and Probate Act 1958. These transfers are also eligible for the Section 42 exemption, provided they follow the statutory distribution formula exactly.

The same risks apply: if beneficiaries decide to redistribute the intestacy entitlements among themselves — swapping who gets what — duty can apply to the difference.

What About Land Transfer Duty vs Stamp Duty?

In Victoria, "stamp duty" on property transactions was renamed "land transfer duty" some years ago. They are the same tax. When the SRO refers to land transfer duty and you hear "stamp duty," these terms are interchangeable in a deceased estate context.

The Practical Warning

Never execute a Deed of Family Arrangement involving real estate without written advice from a property lawyer or tax accountant who is familiar with SRO Ruling DA-051.

This is not a scenario where you can use a template and hope for the best. The duty implications depend on the specific asset values, the proportionate entitlements in the will, and the exact structure of any side payment. Getting it wrong — even by agreeing to something informally before lodging the formal transfer documents — can result in an SRO assessment that is very difficult and expensive to reverse.

If beneficiaries want to reorganise who receives what from the estate, the time to get tax advice is before anyone signs anything, not after the SRO has issued a liability notice.

When a Solicitor Is Required

For straightforward transfers that follow the will exactly, a conveyancer can typically handle the PEXA lodgement and SRO duties form. But if there is any restructuring of entitlements — any deviation at all from what the will specifies — engage a property lawyer or tax solicitor before proceeding.

The When Someone Dies in Victoria — Estate Settlement Guide covers the complete property transfer process, including how to prepare the SRO statutory declaration and what the SRO looks for when reviewing deceased estate transfers.

See more Victoria guides →