Our dedicated conveyancing team has extensive experience when it comes to acting for buyers and sellers of residential property. We understand that buying or selling (whether it is your home or an investment property) is not only an important financial commitment but it can also be an emotional and stressful time for you. Don’t forget we do know what you are going through. All of us at RBF Law have at some point bought or sold property and we understand that the process can be overwhelming.
The RBF Law team will be there to protect your interests and to guide you through every stage of the conveyancing process. We aim to make it as ‘stress-free’ as possible for you.
What is conveyancing?
Conveyancing is basically the legal process of transferring ownership of property from a seller to a buyer.
How does the conveyancing process work in Queensland?
The conveyancing process starts from the time you enter into a contract (whether buying or selling) and usually ends shortly after settlement when the property transfer from the seller to the buyer is registered in the Land Titles Office.
During this process it is usual for contract conditions such as cooling off, pest and building inspections and finance to be satisfied as well as any special conditions which have been included in the contract.
Once all contract conditions are satisfied, then the conveyancing process proceeds to settlement.
What should be considered before you buy a property?
Before signing a contract, it is important for you to consult a solicitor to review the contract to ensure:
- your offer is accurately reflected in the contract;
- all special conditions are included to meet your expectations and your personal needs; and
- all disclosure documents required with the purchase a unit or townhouse have been provided by the seller.
When you buy a unit or townhouse it is important to know that you will be taking on a relationship with all other owners and the body corporate such as:
- sharing the ownership of common areas (such as front entrances and foyers, hallways, stairwells, paths, driveways, lifts, pool, tennis court, entertainment areas, fences, lawns and gardens); and
- becoming a member of the body corporate. The body corporate is made up of all owners. The body corporate decides on issues of concern to those owners as well as maintaining the complex and the common property. All owners are also jointly and severally liable for the body corporate debts. All owners make a monetary contribution to the body corporate (by paying body corporate levies) for the ongoing day-to-day expenses as well as to cover anticipated long term costs.
(This information is a guide only and is not a detailed explanation of all matters that should be considered when buying a residential property. Such information should not be treated as legal advice. You should consult a solicitor).
What should be considered before you sell a property?
Before listing your property for sale with a selling agent, you should consult a solicitor to discuss:
- whether there is any matter which should be disclosed to a buyer (such as contaminated land, title encumbrances, unregistered dealings or an unsatisfied judgment, order or writ affecting the property and if selling a unit or townhouse, whether there are any outstanding body corporate liabilities or any proposal to record a new community management statement);
- the implied warranties which you must give as a seller;
- the inclusion (or exclusion) of fixtures and fittings;
- any improvements or changes you have made to the property;
- your obligations under any existing tenancy agreement;
- the settlement date (to make sure any timing issues you have are met. For example, the settlement date of a purchase by you of another property);
- any special conditions you may want to be included in the contract; and
- all disclosure documents required with the sale of a unit or townhouse are satisfactorily completed.
Once a buyer has signed a contract to purchase your property, your selling agent will then deliver the contract to you for your acceptance. Before you sign a contract, you should consult a solicitor to make sure the contract accurately reflects your intentions and all formalities have been complied with.
(This information is a guide only and is not a detailed explanation of all matters that should be considered when selling a residential property. Such information should not be treated as legal advice. You should consult a solicitor).
Can I have my lawyer review the contract before I sign it?
Yes – we strongly recommend that we be given the opportunity to check the contract before you sign it. We will then discuss the terms of the contract with you to ensure that any specific requirements are correctly shown in the contract which could include special conditions.
Who prepares a sale contract?
When a buyer wishes to make an offer to purchase a property, the selling agent usually prepares the standard form contract developed by the Real Estate Institute of Queensland and The Queensland Law Society for the buyer to sign. The selling agent then presents that offer to the seller for acceptance.
We strongly recommend that legal advice be sought before either the buyer or the seller signs a contract to ensure that any specific requirements are correctly shown in the contract which could include special conditions.
What are usual contract conditions?
A buyer usually has a contract subject to building and pest inspections and finance. The contract is also subject to the buyer having a 5 business day statutory cooling off period (unless waived or shortened).
If the buyer terminates the contract during the cooling off period then the seller is able to impose a monetary termination penalty equal to 0.25% of the purchase price. That penalty will be deducted from the deposit paid by the buyer and the balance will then be refunded to the buyer by the deposit holder.
Building and Pest
The buyer must arrange for a licensed building and pest inspector to attend at the property and provide written reports.
The buyer must then decide whether they are satisfied with the reports and provide written notice to the seller by 5pm on the building and pest inspection date noted in the contract. A buyer must act honestly when deciding if the reports are satisfactory.
If the buyer is not satisfied with the building and pest inspection reports then they may be able to terminate the contract provided they have acted reasonably (there must be some real defect with the property).
The seller will also have a right to terminate the contract if the buyer does not notify the seller of the outcome of the building and pest inspection condition by 5pm on the due date.
Buyers should be aware that sellers are not obliged to fix any issue raised in the building and pest inspection reports nor is the seller required to make allowance for a reduction in the purchase price for those issues.
A buyer must apply for finance as soon as possible after the contract is entered into and take all reasonable steps to obtain finance approval by the finance date noted in the contract.
All decisions relating to the acceptability of any finance approval condition rests with the buyer.
The buyer must give written notice to the seller by 5pm on the finance date whether or not they have obtained satisfactory finance approval.
The seller will also have a right to terminate the contract if the buyer does not notify the seller of the outcome of the finance condition by 5pm on the due date.
What are special conditions?
Sometimes a buyer or a seller may need a special condition to be included in a contract to deal with a particular issue which is not covered by a standard contract term such as:
- where the property is contaminated;
- the buyer is purchasing the property ‘as is’;
- the buyer needs foreign investment review board approval;
- the buyer is selling their property so therefore a prior sale contract is required to be completed so the funds from that sale can then be applied towards the purchase;
- the seller already has a sale contract but that prior contract is needed to be terminated;
- the buyer requires a due diligence condition;
- the buyer requires the seller to provide copies of final building certificates;
- the seller is waiting on final certificates for the improvements to be issued; or
- vacant land is being purchased so a soil test is required.
A special condition needs to be included in the contract at the time of negotiations and before the contract is signed by the buyer and the seller. You should contact our experienced team to provide you with advice and guidance on the conditions best suited to your transaction.
Do I have a cooling off period if I buy a property?
The contract is subject to a buyer having a 5 business day cooling off period (unless waived or shortened or the property is sold at auction). The cooling off period commences on the date you or your solicitors receive a copy of the contract signed by both you and the seller.
If you terminate the contract during the cooling off period then the seller is able to impose a monetary termination penalty equal to 0.25% of the purchase price. That penalty will be deducted from the deposit you paid and the balance is then required to be refunded to you by the deposit holder.
I have put the wrong buyer name on the contract. Can I change this name?
The short answer is ‘no’.
In Queensland once a contract has been signed by the buyer and the seller the buyer’s name cannot be changed. If another party needs to be added to the contract, or the buyer entity needs to be changed to a corporate entity, then the buyer and the seller would need to agree to rescind the contract and enter into a new contract on the same terms as the previous contract but noting the correct buyer details.
Most sellers will agree provided the buyer pays their legal costs associated with this process and also provides them with a transfer duty (stamp duty) indemnity in the event the Office of State Revenue assesses double stamp duty – stamp duty on the original contract and stamp duty on the new contract.
A buyer should always bear in mind that a seller is under no obligation to agree to a rescission of a contract due to an incorrect buyer entity being noted on a contract.
If only a minor change needs to be made to a buyer’s name on a contract such as correcting a misspelt name or adding or deleting a middle name then this can usually be corrected by formal agreement of both the buyer and the seller through exchange of solicitors’ letters. These types of amendments are usually required because the buyer’s name on the contract does not correlate with the buyer’s formal identification such as a birth certificate, passport or driver’s licence which prevents a bank from being able to formally identify that person and provide finance for the purchase of the property.
Can I purchase a property with the words ‘or nominee’ noted after the buyer’s name on a contract?
The short answer is ‘no’.
The most common reason for a buyer wanting to include the words ‘or nominee’ on a contract is that they have not had time to speak to their accountant as to the entity they should be using to buy the property and they want to be able to change the buyer entity at a later stage. Sometimes a buyer may even include a special condition providing for the contract to be amended to provide for the correct buyer entity or for the contract to be terminated and a new contract entered into with the new buyer entity.
The use of the word ‘or nominee’ or substituting a buyer entity could result in the buyer having to pay transfer duty (stamp duty) twice.
In Queensland, a contract needs to reflect the correct buyer entity from the outset. Once a contract has been signed by the buyer and the seller the buyer’s name cannot be changed. The buyer and the seller would need to agree to rescind the contract and enter into a new contract on the same terms as the previous contract but noting the correct buyer details. A seller may agree to this provided the buyer pays their legal costs associated with this process and also provides them with a transfer duty (stamp duty) indemnity in the event the Office of State Revenue assesses double stamp duty the buyer will attend to payment.
A buyer should be aware that a seller is under no obligation to agree to a rescission of a contract due to an incorrect buyer entity being noted on the contract.
The only time ‘or nominee’ should be used is where:
- the buyer knows who the nominee is when the contract is signed;
- the buyer was appointed in writing as agent for the nominee buyer prior to the contract being entered into; and
- the nominee buyer pays the deposit.
An another alternative if the buyer does not know the correct buyer entity is a put and call option agreement with a right for the buyer to nominate another buyer entity. This operates like a normal sale contract in that the buyer has an option to buy and the seller has an option to sell so neither party can walk away from the sale. The buyer can nominate another entity to exercise the option and complete the purchase without incurring double stamp duty. However, a seller would need to agree to this type of transaction and extra legal fees would be incurred to draft the put and call option agreement.
When is the deposit required to be paid?
A contract will state the total amount of the deposit required to be paid by the buyer and will also state the date for payment.
A buyer must pay the deposit strictly in accordance with the terms of the contract. If a buyer proposes to pay the deposit by direct debit or bank transfer then they should endeavour to ensure it is received by the deposit holder by the date stated in the contract. If not, the seller may argue the buyer has breached their obligations under the contract.
If the deposit is not paid by the buyer on the due date then the seller may have a right to terminate the contract and claim compensation from the buyer even after the deposit is paid.
To reduce risk, a buyer should consider paying the deposit by cheque and deliver it to the deposit holder on or before the due date.
A buyer should always have sufficient evidence of when they paid the deposit to the deposit holder.
Do I need to arrange insurance if I am buying a property?
Yes - both the REIQ and ADL contracts provide that the property is at the buyer’s risk from 5pm on the next business day after the contract date (unless a special condition is inserted into the contract stating that the property is to remain the risk of the seller until settlement). This is why it is important for a buyer to take out the appropriate insurance as soon as a contract has been signed.
Here are the different types of insurances which should be considered depending on whether the property being purchased is vacant land, a house, a high-rise unit, a townhouse or a house in a gated community.
|Property||Type of Insurance|
|Vacant Land||Public liability insurance|
|House||Replacement value, contents and public liability insurance|
|Unit - with common walls||The body corporate is responsible for insuring the building (replacement value) and public liability for the common property and any relevant body corporate assets. A buyer is required to insure the contents such as carpets, curtains, internal blinds, whitegoods, window breakage, etc, as well as arrange public liability insurance for the interior as well as for any exclusive use areas.|
|Unit, Townhouse, House in a gated community - with no common walls||The body corporate is responsible for public liability insurance for the common property and any relevant body corporate assets. The body corporate may insure the building with the agreement of all lot owners. A buyer should insure the building for replacement value and insure the contents such as carpets, curtains, internal blinds, whitegoods, window breakage, etc, as well as arrange public liability insurance.|
|If property tenanted||Landlord protection insurance|
Do I need to provide the buyer with a pool safety certificate?
If you are selling a property that has a non-shared pool then you must provide the buyer with either:
- a pool safety certificate;
- a building certificate that may be used instead of a pool safety certificate;
- an exemption notice; or
- a notice of no pool safety certificate.
If any of the certificates expire before settlement, then a seller must obtain a new certificate before settlement and provide it to the buyer.
If a seller does not give the buyer either a pool safety certificate, a building certificate that may be used instead of a pool safety certificate or an exemption notice then they must notify the chief executive of the Department of Housing and Public Works before settlement that a pool safety certificate is not in effect.
If a seller does not complete the pool safety questions in the contract, or provide the buyer with a notice of no pool safety, then the contract will be conditional on the buyer obtaining from a licensed pool safety inspector:
- confirmation that the pool safety requirements have been met and the issue of a pool safety certificate; or
- the issue of a notice of non-conformity confirming the works required to be done before a pool safety certificate can be issued.
Either of these certificates must be obtained by the buyer before the pool safety inspection date. However, a seller is still able to obtain a pool safety certificate during this period, provide a copy to the buyer and give notice to the buyer that this condition has been satisfied. The buyer’s right to terminate will then be at an end. This action by the seller will avoid the possibility of the buyer terminating the contract because they did not obtain a pool safety certificate because of some minor non-conformity. The Buyer also has the right to waive the benefit of the condition prior to the pool safety inspection date.
In the case of a shared pool (e.g. a pool at an apartment building or at a townhouse complex), the body corporate is responsible for obtaining a pool safety certificate. As a seller you still have an obligation to provide the buyer with a notice of no pool safety where a pool safety certificate is not in effect. The body corporate will then have the responsibility to obtain a pool safety certificate.
There are substantial penalties for not complying with the pool safety standard.
Owners of swimming pools (including bodies corporate) are responsible for ensuring that their pool is recorded on the Queensland Government pool safety register. Failure to do so can result in a fine.
Are you buying or selling a property with a tenant?
If you are a seller
The details of your tenancy must be noted on the contract. These details include the tenant’s name, the start and end dates of the tenancy, whether it is a fixed or a periodic tenancy, the rent and bond paid and the property manager’s details. If the tenancy is not noted then you will be required to give the buyer vacant possession of your property on settlement. If you have tenants but the property is being sold with vacant possession you will need to issue the tenant with the required notice to vacate (there are specific time limits depending on whether it is a fixed tenancy or a periodic tenancy and whether there is a breach). If you are unable to provide vacant possession to the buyer on settlement then the buyer will be able to terminate the contract or delay settlement and may be entitled to claim compensation from you.
If you are a buyer
If you are buying the property to live in as your principal place of residence and you intend to claim a home occupation transfer duty concession then you must ensure the current tenancy expires within 6 months of settlement. The tenants will be required to vacate the property immediately upon expiration of the tenancy. You must not renew or extend the existing lease or enter into a new lease with another person otherwise you may lose your eligibility for the duty concession. If the end date of the current tenancy agreement is longer than 6 months after settlement then you will need to make appropriate arrangements (including serving a notice to vacate on the tenant) to ensure the tenant vacates the property within the required 6 month period.
Alternatively, you may wish to include a special condition in the contract that the seller is required to provide you with vacant possession of the property by the settlement date. This means that the seller must make the appropriate arrangements with the tenant to vacate the property.
If you agree to allow the seller to continue to stay in the property after settlement then they must also move out within 6 months of the settlement date for you to be able to claim the home occupation transfer duty concession.
(This is only a general overview of buying or selling a property with a tenant and such information should not be used or treated as legal advice. You should speak with your solicitor regarding your own circumstances.)
When does Gold Coast City Council Local Law 17 apply to a property?
Under Local Law 17, sellers of property in the Gold Coast City Council local government area that:
- have a revetment wall, training wall, jetty or pontoon located completely or partially on their property; or
- is waterfront land (land adjacent to a waterway area) or is land connected or near to a waterway and which has the benefit of one of these works,
must ensure their sale contract contains a clause disclosing to the buyer that Local Law 17 applies to their purchase. A failure to disclose the application of Local Law 17 to a buyer may mean that the seller is liable to a fine.
(This is only a general overview of Gold Coast City Council Local Law 17 and such information should not be used or treated as legal advice. You should consult a solicitor.)
Why do I have to undertake searches if I am buying a property?
A buyer should undertake searches as part of the conveyancing process to identify:
- the property under contract is in fact the property which was inspected and for which an offer was made;
- the legal ownership of the property;
- whether there are any encumbrances on title to the property (such as mortgages, easements, covenants, caveats or any other administrative advices);
- whether there are any adverse property issues (which may give rise to termination of the contract or a claim for compensation from the seller);
- whether there are any restrictions on the use of the property;
- so that the required adjustments can be calculated;
- that the seller has met their disclosure obligations; and
- that warranties in the contract are correct.
We will contact you and let you know if there are issues with any of the search results received and we will give you advice on your rights under the contract and any options you may have.
What is the difference between ‘joint tenants’ and ‘tenants in common’?
When you purchase a property with another person (irrespective of whether that property is to be your principal place of residence or for an investment) you will need to inform your solicitor whether you will be holding the property as ‘joint tenants’ or ‘tenants in common’.
When a property is owned ‘as joint tenants’, this means that each owner holds the exact same and equal interest in the property as the other owner(s). It also means that on the death of an owner his or her share will automatically be transferred to the surviving owner(s) irrespective of the provisions of the deceased’s Will. This is known as the right of survivorship.
On the other hand, if you decide to purchase a property ‘as tenants in common’ then each owner holds an individual interest in the property and that interest is recorded on the title to the property being purchased. For example, each owner may own equal 50/50 shares, or own a 1/100 and a 99/100 proportion, or a 1/3 and 2/3 proportion or any other proportion as agreed to. This will mean that on the death of an owner his or her share will be transferred in accordance with his or her Will and will not be automatically transferred to the surviving owner(s).
Your decision on the tenancy can affect you in the future particularly from an estate planning perspective as well as from a tax perspective as you may wish to minimise the amount of assets you hold and prefer to hold a minimal portion of property only.
(You should always check with your solicitor and your accountant about the tenancy best suited for your requirements especially if you are purchasing an investment property with another person.)
What does ‘time is of the essence’ mean?
This is a legal term that means both the seller and the buyer must perform their obligations strictly by the due date. For example, both parties must settle by 4pm AEST on the settlement date. If the buyer does not settle, then the seller may either terminate or seek to enforce the contract. In both cases, the seller may claim compensation from the buyer.
If either the seller or the buyer, after making all reasonable efforts, is not able to meet their settlement obligations because of a natural disaster then, in certain limited circumstances, time will no longer be of the essence. When the natural disaster no longer prevents performance of the parties’ settlement obligations then a notice must be served to make time once again of the essence. Both parties will then be obliged to settle on the date stated in the notice.
What happens on a settlement?
Settlement is the day noted in the contract when all of the parties’ legal and financial representatives meet at a prearranged place and time. Settlement must take place between the hours noted in the contract which is usually between 9am and 4pm. If the settlement date falls on a public holiday or a weekend then settlement must occur on the next business day. At settlement, all of the required legal documents are exchanged for payment of the purchase price and possession of the property is then given to the buyer.
What happens if either the buyer or the seller cannot settle on the settlement date?
The party who is unable to settle usually requests an extension of time from the other party.
If the buyer requests the extension, then the seller is able to impose a monetary penalty which is determined by the terms of the contract. This usually involves default interest being charged on the balance purchase monies calculated daily from the original settlement date through to when settlement actually occurs. If the contract does not stipulate the default interest rate then that rate is usually the rate determined by the Queensland Law Society at that particular time. The seller may also require settlement adjustments to be calculated as at the original settlement date and may also require the buyer to pay their additional legal fees.
If the seller requests an extension of the settlement date, then the buyer may impose similar conditions.
If an extension of time is granted then it should be granted on the basis that time will remain the essence of the contract. This will then enable a party to force the performance of the contract should they be required to do so at a later date. If time is not of the essence, then a party cannot force settlement to occur on a specific date which can have significant implications for the party who wants to settle at a later time.
If an extension is not granted then:
If you are a buyer:
The seller can either affirm or terminate the contract.
If the seller affirms the contract, they may sue you for:
- damages; or
- specific performance (where they require you to comply with your contractual obligations and settle); or
- damages and specific performance.
If the seller terminates the contract, they may do all or any of the following:
- take back possession of the property;
- claim the deposit you paid and any interest earned (if the deposit was invested);
- sue you for damages;
- resell the property. If the property is resold at a lesser value, then the seller may sue you for the difference in the resale price. They may also sue you for any expenses relating to any repossession, any failed attempt to resell, and the resale of the property. However, this is on the basis that the resale of the property settles within 2 years of your contract being terminated by the seller.
If you are a seller:
The buyer can either affirm or terminate the contract.
If the buyer affirms the contract, they may sue you for:
- damages; or
- specific performance (where they require you to comply with your contractual obligations and settle); or
- damages and specific performance.
If the buyer terminates the contract, they may do all or any of the following:
- recover the deposit they paid and any interest earned (if the deposit was invested); and/or
- sue you for damages.
Whether you are a buyer or a seller, the best way to make sure that you are protected is to make sure that you do everything that you can to prepare for settlement on the due date.
(This is only a general overview of settlement extensions and such information should not be used or treated as legal advice. You should consult a solicitor.)
What are body corporate levies and do I have to pay them?
All bodies corporate in Queensland have expenses which require planning. The money that lot owners contribute to the body corporate is paid into funds. There are usually two funds – the administrative fund and the sinking fund.
The administrative fund is used to pay for items such as:
- manager’s fees;
- caretaker’s fees;
- daily administration;
- other recurring expenditure; and
- maintaining the common property.
The sinking fund is used for major expenditure of a capital, or non-recurring, nature such as repainting the building or replacing a roof or lift.
Before each annual general meeting, the body corporate committee prepares a budget for both the administrative fund and the sinking fund. Committee spending is limited and money must be available in the budget before the committee can spend it. Each lot owner then votes at the annual general meeting to approve those budgets and to also agree on how much lot owners are to pay throughout the year to be able to raise enough money to meet those budgets. This revenue is called a levy. The body corporate then decides on how lot owners are to make levy payments throughout the year i.e. yearly, half yearly or quarterly. Based on that determination, the body corporate manager then issues levy notices to all lot owners. All lot owners are required to pay those levies when due otherwise interest may be charged.
If there is no provision, or there is insufficient provision, in the budget for particular expenditure then the committee must call a body corporate general meeting to approve a special levy to be able to pay for that expenditure. If the body corporate meeting approves the special levy, a levy notice is then sent to each lot owner for their share of that special levy.
A specified two-lot scheme (such as a duplex) still has body corporate expenses. However, those lot owners are not required to pay levies into an administrative fund or a sinking fund. When body corporate expenses arise, such as insurance, it is usual for the two lot owners to share those costs with such costs being recorded in a lot owners’ agreement.
I am buying in a community titles scheme - what are my maintenance obligations?
The maintenance responsibilities for the body corporate and the lot owners will vary depending on the type of format plan applicable to the community titles scheme.
Properties in a community titles scheme such as units, duplexes or townhouses are either registered under a building format plan or a standard format plan.
A building format plan usually applies to a high-rise apartment complex but it can, in some cases, also apply to a townhouse development. This type of plan defines the land using the structural elements of a building including floors, walls and ceilings.
On the other hand, a standard format plan includes townhouses and villas where each lot has a building and a yard. The boundaries of those lots are defined by the measurements shown on the survey plan and any marks on the ground.
|Building Format Plan
Body Corporate Maintenance Responsibilities:
Lot Owner Maintenance Responsibilities:
|Standard Format Plan
Body Corporate Maintenance Responsibilities:
Lot Owner Maintenance Responsibilities:
What is transfer duty and do I need to pay it?
Transfer duty (also referred to as stamp duty) is a tax charged by the State Government on a purchase contract and is payable by the buyer. Transfer duty is calculated on the purchase price and different rates apply depending on whether the property is being purchased as a principal place of residence, for investment purposes or by a company or trust. The buyer will need to have documents stamped and pay the transfer duty either 30 days from when the contract becomes unconditional or on settlement, whichever occurs first. If the contract is not stamped and transfer duty is not paid on time then penalty interest can be imposed.
A buyer who buys a property to live in as their principal place of residence is eligible to apply for a concession on the transfer duty payable. In some circumstance, such as a first time buyer, the concession may result in nil transfer duty if the purchase price is less than $500,000.
To be eligible for a home occupation transfer duty concession, the buyer must meet certain criteria such as:
- you must be an individual; and
- you must move into the property as your home (with your personal belongings) and live there on a daily basis within 1 year from settlement; and
- you must not dispose of the property during that year (i.e. must not transfer, sell, lease, rent or otherwise grant exclusive possession of all or part of the property before you move in).
(You should always check with your solicitor or the Office of State Revenue as to the amount of transfer duty payable in your transaction, whether you are eligible for a home concession and the due date for payment.)
I am a foreign buyer so do I have to pay additional transfer duty?
A foreign buyer or entity who is purchasing residential property in Queensland will be required to pay a 7% Additional Foreign Acquirer Duty. This duty is an extra amount payable in addition to normal transfer duty, landholder duty or corporate trustee duty which is payable in a particular transaction.
This additional duty will apply to purchases by individuals (who are not Australian citizens or permanent residents); companies incorporated outside of Australia; companies incorporated in Australia in which foreign persons have a 50% interest or more; and a trust where 50% of the trust interests are held by foreign persons (such as unitholders or beneficiaries).
'Residential land' for the purpose of the 7% Additional Foreign Acquirer Duty includes established homes and apartments; vacant land on which a home or apartment will be built; land for residential development; and buildings refurbished, renovated or extended for residential use, but does not include land used for hotels and motels purposes.
A transaction which is exempt from transfer duty, landholder duty or corporate trustee duty will also be exempt from the Additional Foreign Acquirer Duty.
If this applies to you, then you should contact us for an estimate of the transfer duty payable on your transaction.
What happens if the sale price (or market value) of a property is $750,000.00 or more?
The Foreign Resident Capital Gains Withholding Tax Regime will affect real property if the sale price (or market value) is $750,000.00 or more. Despite the regime referring to ‘foreign residents’, it is important to note that it will apply to all sellers (whether a foreign resident or an Australian tax resident). It is important to understand that this regime is different to the requirements of the Foreign Investment Review Board where foreign persons generally need to apply for approval or obtain a no objection notice before purchasing property in Australia.
An Australian tax resident selling real property with a market value of $750,000.00 or more will need to obtain a clearance certificate from the ATO prior to settlement to ensure they do not incur the 12.5% withholding tax.
A foreign resident seller can apply for a variation of the withholding tax rate or make a declaration that a membership interest is not an indirect Australian real property interest and therefore not subject to withholding tax.
If a clearance certificate or a variation notice is not provided by the seller at settlement then the buyer must retain 12.5% of the purchase price and pay this amount to the ATO as a withholding tax following settlement. Penalties may apply if a buyer does not comply.
A threshold of $2million or more and a 10% withholding tax rate will apply for all contracts entered into before 1 July 2017, even if they do not settle until after 1 July 2017. This may apply to an off-the-plan sale contract.
A clearance certificate is valid for 12 months and is specific to a particular entity (i.e. the registered owner recorded on title) and not linked to a particular property.
This new regime applies to a range of transactions beyond the sale of taxable Australian real property. You should contact us if you think this regime may apply to your sale.
When does the GST Withholding regime apply to a sale?
The GST Withholding law applies to ‘new residential premises’ or ‘potential residential land’ (with some limited exceptions). GST generally only needs to be withheld where the buyer is the recipient of a taxable supply of ‘new residential premises’ or ‘potential residential land’. The REIQ contracts have a GST Withholding section which must be completed at the time the contract is prepared for signing by the buyer.
‘New residential premises’ will apply to residential premises where any of the following apply:
- they have not previously been sold (or subject to a long term lease) as residential premises;
- they have been created through substantial renovations; or
- new buildings are built to replace demolished buildings on the same land.
‘Potential residential land’ is land that is permissible to be used for residential purposes but does not contain any buildings that are residential premises.
Residential premises will no longer be ‘new residential premises’ if they were built for sale but are then used solely and continuously for rental for a period of at least 5 years – they will be treated as existing residential premises (with some exceptions).
The GST Withholding obligations will not apply to transactions where the seller is not registered or required to be registered for GST because the sale is not a taxable supply or the buyer is purchasing the property for a creditable purpose and they are registered for GST (e.g. land is purchased for the purpose of building a house and selling it in the ordinary course of business).
The withholding amount will be different depending on the circumstance. The withholding amount must be notified by the seller to the buyer prior to settlement. The buyer will be required to complete the required forms online with the ATO prior to settlement and provide copies of those forms to the seller. A buyer will not need to register for GST just because they have a withholding obligation under a contract. If there is an obligation for GST to be withheld on settlement, then the buyer will be required to withhold that amount and pay that amount to the ATO on settlement. However, the REIQ contract provides a reversal of this payment obligation and the seller must collect a bank cheque for the GST on settlement and remit it to the ATO but the buyer will still be held liable for the GST payment. Sellers will also still need to lodge their BAS and report their GST liabilities or entitlements on taxable supplies of these types of properties.
(This is only a general overview of the GST Withholding Obligations and such information should not be used or treated as legal advice. You should consult your solicitor and accountant as to whether the GST Withholding regime applies to your transaction and what your obligations are.)
What is the effect of the new Combustible Cladding Regulation?
The Regulation requires all building owners (such as bodies corporate) of certain classes of building to register and complete an online checklist via the QBCC by 29 March 2019. Depending on the outcome, further steps may be required to be undertaken by later dates as set out in the Regulation. Penalties apply if the initial checklist and any further required steps under the Regulation are not completed.
If a building has non-confirming cladding then a notice to that effect must be displayed in a conspicuous part of the building for so long as the cladding remains in place and every lot owner and tenant must be given a copy of that notice (including new tenants and new owners).
Sellers of buildings subject to the Regulation are now required to disclose whether the seller has complied with the relevant provisions of the Regulation and copies of those documents are to be provided to the buyer prior to settlement.
If you sell a lot in a community titles scheme where cladding is present you are not required to give disclosure to the buyer prior to settlement but you should carefully consider whether you should disclose the existence of combustible cladding in the sale contract as the non-conforming cladding may be considered by the buyer as a defect in common property which you were aware of (or ought to have been aware of) which may then give rise to the buyer terminating the sale contract.
If you are a buyer of a certain class of building or purchasing a lot in a community titles scheme it is strongly recommended that you conduct a comprehensive search of the body corporate records to ascertain whether combustible cladding is present.
(This is only a general overview of the Combustible Cladding Regulation and such information should not be used or treated as legal advice. You should consult your solicitor.)
What happens if a legal problem occurs with my contract?
The RBF Law team will be there to provide you with comprehensive legal advice when legal problems arise. Our conveyancing matters are managed by our conveyancers but our Legal Practitioner Director maintains a high level of involvement and supervision at all stages of the transaction. At RBF Law we will protect your interests and guide you through every step of the conveyancing process. We aim to make it as 'stress-free' as possible for you.
Disclaimer: This information is a guide only and is not a detailed explanation of the law. This information should not be used, treated or relied upon as proper legal advice and you should contact a solicitor before making any decisions concerning your requirements.