[BUYING AND SELLING REAL ESTATE IN AUSTRALIA]
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Land Tax When purchasing a property, it is important to understand what annual outgoings are payable such as council rates, water rates and land tax. Land tax is calculated as a percentage based on the value of land and is an annual charge. The purpose of land tax is to assess an owner of land on the aggregate value of all taxable land they hold in a particular State or Territory. Land tax is payable in each State and Territory in Australia except for the Northern Territory. The thresholds for when land tax is payable vary for each State and Territory. If the property being purchased is held on trust, a trustee surcharge may apply. New South Wales, Queensland, Victoria, and South Australia have a trustee surcharge regime. Depending on the State, different tax-free thresholds apply for property held on trust. Land tax is not payable by an owner who uses the property as their principal place of residence. Foreign owners are obliged to pay additional absentee duty. Leases If the property is leased, then the sale of the property will be subject to the lease, unless the lease expires before settlement occurs. In some States and Territories, leases of a certain duration must be registered on title. If a property is leased, this means that vacant possession of the property will not be provided to the purchaser at settlement. The type of property (e.g., residential, commercial, or retail) will determine the type of lease. For example, if the property is used for retail purposes (e.g., a shop), then the lease will likely be a retail lease and will be subject to the relevant retail tenancy legislation. Each State and Territory has its own retail tenancy legislation, which is very prescriptive. It is important for a purchaser to review the terms of the lease to ensure it is enforceable, the
vendor has been complying with the retail tenancy legislative requirements and there are no tenant rights in addition to those contained in the lease. Personal Property Securities Act 2009 Purchasers should check whether the vendor has granted any security interests under the Personal Property Securities Act 2009 (Cth) (“ Act ”). This Act came into operation on 30 January 2012, and it relates to personal property. A security interest in personal property includes most forms of tangible and intangible property (e.g., motor vehicles, goods, long term leases). However, the Act excludes dealings in land. If there are security interests registered against the vendor, then a purchaser should check if the security interest affects any goods, plant, or equipment, being purchased by the purchaser. If a security interest exists, the purchaser must ensure that the contract requires the security interest to be released at settlement. The release of registered security interests are usually dealt with in the conditions of the contract. GOODS AND SERVICES TAX GST is a federal tax of 10% introduced in Australia on 1 July 2000 under A New Tax System (Goods and Services Tax) Act 1999 (Cth). It is similar to a value added tax, whilst the primary liability for GST is on the vendor, or supplier, a contract may transfer responsibility to the purchaser. GST is imposed on the supplier in respect of taxable supplies. Whether GST applies to a particular property transaction will depend on whether the supply is taxable. Threshold Requirements Whether a supply is taxable will depend on four threshold requirements:
Consideration (monetary or otherwise, but not a gift);
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ILN Real Estate Group – Buying and Selling Real Estate Series
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