When does the Property Transfer clock start in a divorce?
A recent Chief Registrar’s Circular has shed light on the challenges of determining the correct transaction date for divorce-related property transfers—especially when settlement agreements are amended after the divorce. In this article, we look at the current position.
In the Chief Registrar’s Circular No.6 of 2024, the Chief Registrar suspended the Registrar’s Conference Resolution RCR 9/2024 which had initially determined that the date of divorce was the transaction date for purposes of transfer duty. However, the Transfer Duty Guide of SARS states that property acquisition occurs on the court order date or, in the case of later settlements, the date of the subsequent settlement.
The Chief Registrar aligned itself with the SARS interpretation, emphasising that if an Addendum modifies the original settlement agreement, the date that the subsequent settlement is reached should be used. Because of this discrepancy, the Chief Registrar suspended RCR 9/2024 until further discussion at the next Registrar’s Conference.
RCR 9/2024 dealt with a specific situation in which a divorced couple signed a Settlement Agreement that was made an order of court, stating that the property would be sold. Later, the parties added an Addendum to the Settlement Agreement, giving one of the ex-spouse’s full ownerships of the property. The primary legal concern was whether the Addendum's signing date or the divorce date should be used as the transaction date.
According to RCR 9/2024 the "date of divorce" would be the correct transaction date, but this stood at odds with the SARS perspective.
In the SARS Transfer Duty Guide, paragraph 4.3.2, the date of acquisition of property as a result of a divorce is the date of the order of the court and not the date of the agreement between the parties in regard to the division of the joint estate or separate estates as incorporated in the order of the court.
Importantly, the date of aquisition however becomes the date of any subsequent settlement regarding the property if one is achieved after the formal court processes are over. In these situations, the exemption provided by the Transfer Duty Act 40 of 1949 in section 9(1)(i) remains in effect, even if the agreement was reached after the court order.
This discrepancy between RCR 9/2024 and SARS' interpretation leads to the Chief Registrar’s suspension of RCR 9/2024 and determination that for the present, the Addendum's signing date, not the divorce date, should be the appropriate transaction date because the property was granted to one spouse by the Addendum after the court order and that this view was consistent with the definition of "date of acquisition" in paragraph (a) of section 1 of the Transfer Duty Act 40 of 1949.
Given the above, the suspension of RCR 9/2024 will remain until the next Registrars’ Conference where it may be further discussed and possibly finally withdrawn.
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Source: Seymore du Toit & Basson
