The concession was intended to run until December 31 2011, but will now be replaced by a new dispensation from the end of September.
Although there are changes, taxpayers should welcome the new concession as it provides far greater flexibility, says Dylan Buttrick, tax specialist at Mazars.
Previously, a person (either as an individual or together with a spouse) had to hold all the shares directly in the company that was transferring the property. Alternatively, he or she must have donated or financed the residence held by a trust.
The taxpayer must have personally lived in the residence being transferred on a daily basis. "This legal jargon effectively resulted in the requirement that property being transferred must be the primary residence of the individual concerned," says Buttrick.
The unnecessary restrictions of the old law were quickly identified. For example, where a family trust owned a company, which in turn held the residence, the individual would not be able to make use of this tax concession as he or she was required to hold the shares directly in the company.
This was counter-productive to the government's aim of removing unnecessary entities from the company register, and to simplify the administration and enforcement of the law, Buttrick says.
Holiday home concession
Now, the new rules apply to residents who are "connected persons" in relation to the company or trust.
"In our view, this change in wording will facilitate the transfer of a residence in instances where a family trust holds the shares in the company, which in turns holds the property. It provides a far greater application than the previous regime."
An important difference is the reference to a residence mainly used for "domestic purposes". In other words, the residence being transferred now no longer has to be the taxpayer's primary residence.
This means that "domestic purposes" now will also allow a holiday home (as long as it is not rented out more than 50% of the time) to be transferred to the individual.
"Under the old regime, many of our clients were frustrated that the legislation didn't permit them to transfer their holiday homes. This change is undoubtedly a response to such criticisms."
Buttrick says it must be emphasised that to achieve the objective of cleaning up the company register, this new relief requires the company transferring the property to be liquidated or deregistered within six months. And in the case of a trust, the revocation of that trust must occur within six months.
The overall effect of the dispensation is that any taxpayers who have not yet taken advantage of the concession as it stands at present have a new and far more flexible way of transferring property.