UPDATE : New Contract for Sale and Purchase of Land 2016 Edition: released to include provisions for new Foreign Resident Capital Gains Withholding Tax and Swimming Pool Laws
On 30 May 2016, the Law Society released the Contract for Sale and Purchase of Land 2016 edition.
The new edition of the Contract incorporates the recent changes to Swimming Pool Laws and upcoming changes to the Foreign Resident Capital Gains Withholding Tax Laws.
Selling a Property with a Swimming Pool
The Conveyancing (Sale of Land) Amendment (Swimming Pools) Regulation 2016 commenced on 29 April 2016.
If a vendor is selling a property with a swimming pool, from 29 April 2016, the contract must include a copy of one of the following:
- A valid certificate of compliance; or
- A relevant occupation certificate and evidence that the swimming pool is registered; or
- A valid certificate of non-compliance.
The above requirements do not apply if:
- The contract relates to a lot in a strata scheme or in a community scheme and that strata or community scheme comprises more than 2 lots; or
- The contract is an off the plan contract.
Foreign Resident Capital Gains Withholding Tax
From 1 July 2016, new rules will apply to vendors selling Australian real property with a market value of $2 million or more. Such rules apply to both Australian and foreign residents.
Where a vendor enters a contract for the sale of Australian real property with a market value of $2million or more on or after 1 July 2016, purchasers will need to withhold 10% of the purchase price and pay it to the Australian Taxation Office (“ATO”) at settlement.
Vendors who are Australian residents can avoid the 10% withholding by providing the purchaser with a Clearance Certificate prior to settlement. Each named vendor under the contract must apply for a Clearance Certificate.
In the case of foreign resident vendors, 10% of the purchase price will be withheld at settlement by the purchaser and provided to the ATO. Foreign resident vendors may be able to vary the amount that is withheld at settlement in certain circumstances by lodging a Variation Application with the ATO.
Vendors can apply for a Clearance Certificate or lodge a Variation Application on the ATO website.
Summary of main changes made in Contract for the Sale and Purchase of Land 2016 Edition (from the 2014 Edition)
The main changes made in the 2016 Edition of the Contract include:
- Front Page: Item “NSW Duty” added to front page to facilitate the notation of the OSR reference number, which confirms that the contract has been stamped.
- Page 2: Foreign resident capital gains withholding Clearance Certificate, Land Tax Certificate, Certificate of non-compliance under Swimming Pools Act 1992 and detailed reasons of non-compliance under the Swimming Pools Act 1992 added to the list of documents in line with recent legislative changes.
- Page 4: Updated Government departments, entities and utilities.
- Page 4: New warning 11 added to alert the parties to the new foreign resident capital gains withholding measure.
- Definitions:
- New definitions inserted in relation to the new foreign resident capital gains withholding measure including definition of clearance certificate, remittance amount, TA Act and variation.
- The definition of “work order” revised to expressly exclude notices under section 22E of the Swimming Pools Act 1992 or clause 18B of the Swimming Pools Regulation 2008.
- Clause 16.6 amended so that whether the land tax certificate is obtained by the purchaser or the vendor, that the vendor must give the purchaser a clear land tax certificate on completion.
- Clause 16.7 amended to allow for the purchaser to withhold any necessary payment under the foreign resident capital gains withholding measure and excluded that from the amount paid to the vendor on completion.
- Clause 20.8 amended so that the purchaser’s obligation to provide the vendor with evidence of payment of the withholding tax to the ATO continues after settlement.
- Clause 28.3 amended to provide for consistency with legislative changes made to a vendor’s ability to rescind an off the plan contract, which commenced from 2 November 2015.
- Clause 30.11 amended to remove the need for a purchaser to produce a cheque and forward it to the ATO after settlement if the settlement takes place in the electronic work space.
- New Clause 31 added to deal with the new Foreign Resident Capital Gains Withholding Tax requirements.
Tips
- If the purchase price is $2 million or above and the vendor is an Australian resident, you should let them know they will need to obtain a Clearance Certificate from the ATO to avoid 10% of the purchase price being withheld at settlement.
- If the purchase price is $2million or above and the vendor is a foreign resident, you should let them know that 10% of the purchase price will be withheld at settlement by the purchaser and provided to the ATO. You should advise them that they may be able to vary the amount withheld by lodging a Variation Application with the ATO.
- If the sale price of a property is over $2million, check that the 2016 edition of the Contract for Sale and Purchase of Land has been used.
- If the 2005 or 2014 edition of the Contract has been used, check that a special condition which addresses the Foreign Resident Capital Gains Withholding Tax has been included.
- If the property includes a swimming pool, ensure that the appropriate swimming pool certificates are attached to the contract.
Disclaimer: The information in this article is correct as at 1 June 2016. This information is not to be taken as legal advice and at all times we recommend you seek independent legal advice regarding your own individual circumstances from your legal representative.
For further information, please contact:
Elizabeth Pecipajkovski Solicitor Phone: (02) 9267 6263 Email: Elizabeth@jemfish.com.au
Greg Jemmeson Partner Phone: (02) 9267 6263 Email: Greg@jemfish.com.au