Buying or selling a property? Then you need to know about changes to the GST withholding rule

Buyers and sellers: responsibilities
Recently a GST Withholding rule was added to the tax laws. This new rule changes the responsibilities for sellers and buyers. In the past, the seller (company or individual) was responsible for holding onto the GST amount from the sale of new residential property or potential residential land.  This law does not affect the sale of existing residential properties, commercial properties, or contracts entered into before 1 July 2018.

What’s changed
Previously, the seller had to transfer the GST amount from the final sale price to the Australian Tax Office (ATO). Now, this responsibility has shifted to the buyer.

First, the seller must send a written notice to the buyer that:

  • explains the procedure they will follow
  • says whether or not the buyer must withhold a tax amount
  • states the exact amount to be held
  • requests that the buyer choose the respective option in the contract.

If the seller is a company, it must lodge its Business Activity Statement (BAS) and report its GST liability (if any) in order to claim GST credit.

Once the buyer receives the written notice, the buyer must:

  1. lodge Form 1 (GST Withholding Notification)
  2. lodge Form 2 (GST settlement date confirmation)
  3. pay the GST amount directly to the ATO within the specified time frames.

Form 1 can be lodged at any time between the contract being entered and the date of completion.  Form 2 (GST settlement date confirmation) must be lodged on or before the date of settlement. The GST amount is provided directly to the ATO on the date of settlement after lodging Form 2.

Case study
A seller company sends a notice to a buyer stating that a property will trigger the ‘withholding GST’ rule. The buyer enters a contract for a new $500,000 residential property or potential residential land and provides the seller with a $50,000 deposit. The buyer must than lodge Form 1. The GST amount is 1/11th is on the purchase price. Therefore, the GST withheld by the buyer is $45,454.54 ($500K -* 1/11) up to the date of settlement and directly paid by the buyer to the ATO after lodging Form 2 on the date of settlement. The final cheque amount given to the seller from the buyer would be $404,545.45 ($500k minus the $50,000 deposit and the $45,454.54 GST). The buyer’s solicitor may fill in and lodge the forms only if a signed declaration is provided by the buyer granting consent to the solicitor. The seller company must than complete its BAS and report its GST liability.

Get the right advice
Conveyancers and real estate agents are not able to provide GST advice unless they are a registered Tax or BAS agent. The information contained in this article is a summary of the GST changes. For more detailed information you are encouraged to contact the ATO office or speak to a licensed accountant.

Cornerstone Law Offices can help you with all your legal and property or conveyancing related matters. Call us on 1300 267 637 for an initial complimentary consultation (or contact us by clicking here).

 

Five steps to ensuring a smooth commercial property sale

  1. Review the contract

Commercial property sale: Commercial contracts are usually drafted using the standard Real Estate Institute of Queensland (REIQ) commercial land and buildings contract, but either party can choose to include special conditions within the contract that may alter or replace the standard conditions. It’s important that the contract conditions listed reflect your requirements exactly as you want them, as disputes often arise over contractual terms during the process of selling a commercial property.

  1. Meet your obligations

During the process of a commercial property sale, several steps need to be carried out to ensure you meet your obligations as a seller. Along with organising transfer documentation for your sale, a lawyer can assist in negotiating and confirming reasonable extensions of time requested by the buyers, and let you know when each condition becomes satisfied.

If there is currently a mortgage over your property, the release of the mortgage will need to be arranged with the financial institution. Your lawyer can liaise with your bank to ensure that the required steps are taken to ensure the release of the mortgage is ready for settlement.

  1. Know the adjustable items on your settlement statement

In drafting of the settlement statement, adjustable items such as outgoings and rent will need to be considered as they have an impact on the purchase price.  A commercial property may already have a tenant, so your lawyer can help by doing rental adjustments. Occasionally land tax will also be a consideration, and specific calculations for land tax can depend on clauses in the contract.

  1. Be GST prepared: issuing tax invoices

As a seller of a commercial property, if you are registered for GST you will need to provide the buyer with a GST tax invoice to enable them to claim a credit for GST in the purchase price. Your lawyer can assist with identifying what needs to be listed on the invoice, and provide samples of an appropriate invoice.

  1. Confirm you are ready to settle

Settlement of a commercial property sale can be a stressful time without the support of a lawyer. On the day of settlement, your lawyer will usually obtain the final payout figure on your mortgage from your financial institution and submit final cheque details to the buyer’s solicitor.

How we can help
Our expert lawyers can support you at every step of your commercial property sale. For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au

 

 

 

Four steps to ensuring a smooth commercial property purchase

Purchasing a commercial property is a significant investment decision which carries substantial financial implications for you and your family or your business partners.

As there are several considerations which can affect the outcome of your property purchase, it is best to speak with your lawyer before signing any contract to purchase a commercial property to ensure your interests are protected.

  1. Review the contract

The first step in a business purchase should be to engage a lawyer to ensure your contract is exactly as you want it.  Purchasing a commercial property is a considerable investment, so you will need a lawyer not only for the conveyancing but also for pre-contractual negotiations and review.

Along with assisting in negotiation of terms between you and the seller, your lawyer should review the current terms of the contract to ensure that all clauses benefit you and to avoid unwelcome surprises down the track. The final contract should be an accurate reflection of the deal you have negotiated, and should ensure you are not disadvantaged.

  1. Due diligence: know what you are purchasing

The due diligence stage of purchasing a commercial property is extremely important in ensuring the property is in good condition. Searches often reveal surprising information about commercial properties and can make a significant difference to the contractual terms. To avoid being caught out, your lawyer can carry out several searches on the property for you, such as a company search or a search of the contaminated land register.

  1. GST: find out if you are eligible for exemptions

Before signing the contract, you will need to consider the GST implications on the purchase. When it comes to stamp duty, the amount of you will need to pay may increase if GST is to be paid on the contract, as stamp duty is dependant on the purchase price plus GST. However, there are some exemptions such as the ‘going concern’ exemption, which may apply if the property is a business premises or a tenanted building. We can help you determine if you can save money on GST before you sign the contract, which can make a difference to your overall cash flow.

  1. Tenancies: understand what is in the lease

If you are purchasing a property that already has a tenant, the specific terms of the lease can sometimes have an impact on the commercial viability of the purchase. Once you sign the contract you are bound by any leases disclosed in the contract, so you will need an experienced lawyer to review the terms of the lease and determine the terms of the lease and any obligations you are bound to fulfil.

How we can help

Purchasing a commercial property is likely to be one of the most important investment decisions you make. As experienced lawyers, we can help make the process as smooth as possible for you.  For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au

 

 

 

 

Choosing a Conveyancer

Tips for ensuring your property transactions go as smoothly as possible

Buying a property, either as your own home or as an investment property can be an exciting time. It could be your first home or the dream home you have always wanted. Or are you a property investor looking for rental returns and the potential for significant capital gains in the long term?

If you are selling a property you need to make sure your contracts are drawn up correctly. The sale should also happen smoothly and in the prescribed time. This is particularly important if you are in a situation where the purchase of another property is contingent on the sale of yours.

Whether you are buying or selling a home, an apartment, a vacant block, strata title, commercial real estate or a rural property, it is important to get the best legal conveyancing support at all stages of the transactions.

Here are 6 tips for choosing a conveyancer:

1) Don’t just choose the cheapest. Your property sale might be the single largest financial transaction you ever carry out. And when the purchase of one property is connected to the sale of another, the last thing you need is for something to go wrong with the paperwork. Make sure you choose someone who is highly experienced in the legal aspects of a wide range of property transactions.

2) Don’t be pressured into using your real estate agent’s suggested conveyancer. You have the freedom to choose any conveyancer you like to manage your property transactions. Just because your agent has given you a conveyancer’s contact details, it doesn’t necessarily make them the best conveyancer for your situation.

3) Choose someone local to your area. A local, experienced legal conveyancer can provide insights and local knowledge that someone outside your area cannot.

4) Ask for testimonials. Don’t be afraid to ask for testimonials when you are choosing a conveyancer. If they have done a good job for previous clients, these should be easy to obtain.

5) Costs. Before signing up with a conveyancer, make sure you ask for an itemised list of all costs that are involved. Also, check if they have a fixed price guarantee that covers any other matters that might arise. 

6) Customer service. What was your first impression when you contacted the conveyancer? Were they friendly and helpful? How were you treated when you answered the phone, or when you asked them questions? Were you made to feel welcome? If so, then it’s more likely that your whole conveyancing experience with them will go well too.

We can help

We have extensive experience with conveyancing matters and can offer legal advice in regards to real estate contract law, advice for first home buyers, as well as liaising with financial institutions to ensure everything runs as smoothly as possible.

For more information on how we can help you, and for a quote, contact Cornerstone Law Offices on:

Phone: 1300 267 637

info@cornerstonelawoffices.com.au