[BUYING AND SELLING REAL ESTATE IN AUSTRALIA]
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Territory in Australia except for the Northern Territory. The thresholds for when land tax is payable vary for each State and Territory and tend to be increased on an annual basis. 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. 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); • Australia (transaction must occur in Australia); • Registered entity (supply must be made by an entity registered for GST); and • Enterprise (supply must be made in the course of an enterprise). Just because a vendor is not registered for GST, does not mean that GST is not payable on the transaction. GST can still be payable if the vendor is required to be registered for GST. Whether Price Inclusive or Exclusive of GST In property transactions, it is the vendor as the supplier of the property who is primarily liable to remit the GST to the Australian Taxation Office (“ ATO ”). If GST is payable, then purchasers should pay attention as to whether the price for the property is inclusive or exclusive of GST or GST free. If the purchase price is exclusive of GST, the additional cost of GST can be significant, depending on the price for the property. If GST is payable on a property transaction (i.e. the four threshold requirements have been satisfied), then the supplier (i.e. vendor) must provide the purchaser with a tax invoice for the GST. A contract of sale is not usually a valid tax invoice. Stamp Duty is payable on the higher of
ILN Real Estate Group – Buying and Selling Real Estate Series
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