ByLawyers News and Updates

NSW – Contracts for the Sale of Land

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The Conveyancing (Sale of Land) Regulations 2017 will come into force 1 September 2017 affecting contracts for the sale of land.

The main changes are to the disclosure obligations requiring the following to be annexed to the contract:

  • both the sewer mains and the connections diagrams  are now required; and
  • for a strata or community plan property ALL by laws must be attached including the model by-laws.

Changes to contract warnings include:

  • a new warning about loose fill asbestos; and
  • the swimming pools warning has been removed.

Commentary, precedents and the By Lawyers Contract for Sale of Land have all been updated.

Retirement villages in NSW

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A complete guide on the law and practice as it applies to Retirement Villages in New South Wales including  a comprehensive treatment on obtaining accommodation and services within a retirement village, living there, and ending a residency including on sale, on termination, and on death.

This guide is available through the Conveyancing (NSW) publications as well as Leases (NSW).

– Precedents in the guide include:
– Retainer Instructions;
– To-do List;
– Checklist for prospective residents;
– Various letters of advice on commencing residency, completion and moving out;
– Various letters to the operator; and
– NCAT application forms.

The commentary includes information on the fundamental terms of the statutory regime, the standard contracts and mandatory documents, duties taxes and rates, taking occupation, living in a village and ending a residency including death and termination, payment of refund by the operator and dispute resolution.

Land transfer duty benefits

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By Russell Cocks, Solicitor

First published in the Law Institute Journal

State Revenue Office has announced changes to the benefits available to purchasers of real estate to take effect from 1 July 2017.

Imposition of duty on transfer of land in Victoria is a significant source of revenue for the State government. It is also a significant source of angst for taxpayers and people involved in the real estate industry. Changes to the duty regime are often seen as levers for economic development and as such those changes are usually designed to achieve a politically beneficial outcome for the government.

The issue of housing affordability, particularly for first home buyers, is a hot button political issue and the duty changes are targeted at that demographic. The changes apply to contracts of sale after 1 July 2017, which may mean that the months of May and June will be ‘slow’ in this marketplace, followed by substantial uplift from July onwards.

Traditionally a first home buyer needs a minimum of the 10% deposit. Given that duty on a purchase of $500,000 is in the range of 5% the government impost is half of that hard fought for deposit. Granting an exemption or concession in relation to duty should therefore provide a substantial impetus for sales. The contrary argument is that it will simply bring more people into the market and effectively increase the price of housing by the amount of the benefit. This dispute between supply/demand will no doubt continue to occupy the attention of economists but we lawyers will move on to the practical consequences of the changes.

FIRST HOME BUYERS – both new and established homes

Full exemption for purchase price up to $600,000.

Reducing concession between $600,000 and $750,000 (no concession at $750,000).

Requirements:
  1. Purchaser and partner must qualify as ‘first home buyers’; and
  2. Purchaser must be an Australian citizen or permanent resident; and
  3. Purchaser must use property as Principal Place of Residence for a continuous period of 12 months commencing within 12 months of possession.

Importantly in the new home market, the ‘dutiable amount’ is calculated after taking into account deductions relating to the cost of construction post-contract.

One segment of the new home market is based on the first home buyer purchasing the land and then entering into a separate building contract for construction. In this case the dutiable value is based on the land contract and will normally come within the full exemption available up to $600,000. However another method has the first home buyer enter into a land and building contract for the total value of the land and construction. This may have a contract price above the $600,000 threshold but the exemption is available if the value of the land as at the date of the contract is below $600,000. Adopting the Fixed Percentage Method of allocating value in such cases will mean that the full exemption will be available so long as an amount equal to 55% of the contract price is below $600.000, allowing for total contract prices of well over $1m.

This takes us into the realms of:

OFF THE PLAN SALES

Substantial duty concessions have always been available in Victoria in relation to off the plan sales. The availability of this concession is to be limited after 1 July 2017 to properties to be used by the purchaser as their principal place of residence.

The concession is available where the dutiable value of the property is less than $550,000. Importantly, the calculation of dutiable value allows for deduction from the contract price of an amount that represents the value of construction to be undertaken after the date of the contract and prior to settlement. The Fixed Percentage Method of calculation of post-contract construction cost allocates cost as follows:

Single dwelling
  • Construction cost 45%
  • Land component 55%
Multi-lot
  • Construction cost 60%
  • Land component 40%
High rise
  • Construction cost 75%
  • Land component 25%

If a purchaser signs a contract before any construction commences the dutiable value will be below the $550,000 threshold provided that the contact price is less than:

  • Single dwelling $1,000,000
  • Multi lot $1,375,000
  • High rise $2,200,000

and duty will be calculated at the concession rate available to purchasers who intend to occupy the property as their principal place of residence.

The concession that was previously available for investment properties and commercial developments will cease as at 30 June 2017 and the concession will only apply to owner-occupied properties.

NSW – Latest conveyancing changes

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LPI fees increase from 1 July 2017

Retail Leases

Major changes include abolition of the 5 year minimum term, the inability to claim outgoings not disclosed, and the introduction of penalties for failing to comply with key aspects of the legislation.

By Lawyers Contract for the sale of land

  • Updated for the Foreign Resident Capital Gains Withholding Payment changes; and
  • Land tax adjustment section amended to elect if foreign resident land tax surcharge is adjustable.

 

 

VIC – State Revenue Office amendments

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From 1 July 2017:

  • exemption of transfer duty for transfers between spouses is only available for principal place of residence. Transfers following breakdown of relationship are unchanged and the exemption continues to apply to all properties.
  • off-the-plan duty concession is restricted to properties acquired by owner/occupiers who are eligible for the principal place of residence or first home buyer duty concessions.
  • First Home Buyers:
    • Who purchase a property to the value of $600,000 will pay no duty, with concessions available for properties between $600,000 and $750,000.
    • Who purchase in regional Victoria a new home to the value of $750,000 may apply for the First Home Owner Grant of $20,000. Criteria includes the property must be the applicant’s principal place of residence for a continuous period of 12 months, moving in within 12 months of completion.
    • From 27 June 2017 Australian Defence Force personnel enrolled to vote in Victoria on duty or on leave are exempt from the residence requirement for the First Home Owner Grant.

Land Tax

From 1 January 2018, vacant residential properties in the inner and middle ring of Melbourne will be subject to a vacant residential land tax of 1 per cent of the property’s capital improved value. A property will be considered vacant if it is unoccupied for six months or more in a calendar year. The six months does not need to be continuous. There are exemptions for many properties including for vacant land.

 

QLD – Office of State Revenue amendments

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First Home Buyer Grant

The First Home Buyer Grant of $20,000 has been extended to 31 December 2017.

Land tax

An ‘absentee surcharge’  introduced from the 2017-2018 financial year. A 1.5% surcharge will be imposed on individuals not ordinarily residing in Australia and who are liable for land tax.

NSW – OSR changes

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First Home owner

  • First Home New Home scheme ended 30 June 2017 and was replaced by First Home Buyers Assistance scheme. From 1 July 2017 first home buyers of new OR existing homes to the value of $650,000 will pay no duty. Concessions are available between $650,000 and $800,000. There is no change to the caps for vacant land which are exemption to $350,000 and concession from $350,000 – $450,000.
  • First Home Owner Grant (New Homes) scheme property caps are amended from 1 July 2017. The cap for purchasing a new home is $600,000, or $750,000 for the house and land when building a new home under a home building contract or by an owner builder.

Shared Equity Scheme.

A person may purchase a property with an approved equity partner. Subject to eligibility the home buyer may apply for first home buyers assistance and grants. Subsequent transfers from the equity partner to the home buyer are exempt from duty. Principal place of residence land tax exemption is applicable from 2018 tax year.

New Home Grant scheme.

The $5,000 grant for any purchaser of a new home ends 30 June 2017.

Payment of duty in off the plan purchases.

From 1 July 2017 the 12 month duty liability deferral is only available to purchasers who declare their intention to occupy the property as their principal place of residence. If the property is not occupied for 6 months commencing within 12 months of completion interest and penalty tax apply from the lability date.

Foreign Purchaser Surcharge Duty.

Foreign Purchaser Surcharge Duty has increased from 4% to 8% .

Commercial residential property is exempt – retrospective to 21 June 2016.

Permanent residents, including NZ citizens holding a special category visa, are exempt from the surcharge on their principal place of residence if they occupy the home for a continuous period of 200 days within 12 months of purchase.

Australian-based developers will pay surcharge purchaser duty when purchasing the land however may be entitled to a refund on the sale of a new home built by them, if they are an Australian corporation.

Foreign Person Land Tax Surcharge.

From the 2018 tax year the surcharge land tax rate will increase from 0.75% to 2% and commercial residential property will be exempt. Permanent residents, including NZ citizens holding a special category visa, are exempt from the surcharge on their principal place of residence if they occupy the home for a continuous period of 200 days within the land tax year.

Australian-based developers will pay surcharge land tax, however may be entitled to a refund on the sale of a new home built by them if they are an Australian corporation.

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