Thursday, 18 August 2016

New stamp duty surcharge-Applicable to foreign acquirers for property in QLD, NSW and VIC


From 1 October 2016, Queensland will apply a stamp duty surcharge of 3 per cent on direct and indirect acquisitions of residential land by foreign purchasers.

Similar surcharges are in place already in New South Wales and Victoria, having taken affect from 21 June 2016 and 1 July 2016 respectively.

Note however that the surcharge only applies to residential land.

Residential land is land upon which a building is (or will be) situated and approved by the local government for human habitation by a single family unit. It is extended to include land which is (or will be) subdivided into lots for the same purpose. The definition extends to vacant land where a person undertakes or will undertake development of a building or buildings which will fit the description above.

The Commissioner is serious about reaping the surcharge. The foreign purchaser, the vendor and any co-purchaser will all be jointly and severally liable for any unpaid Additional Foreign Acquirer Duty (“AFAD”), even if the vendor is not foreign. If any AFAD is unpaid the Commissioner of State Revenue will have a first-ranking statutory charge over the land and can even obtain a court order to sell the land. However there is some comfort in that subsequent purchasers of lots will not be jointly or severally liable for unpaid AFAD where the Commissioner has yet to register a charge.

Importantly, if the purchaser becomes foreign within 3 years of acquiring the land they will need to notify the Commissioner within 28 days. It is an offence to fail to notify the Commissioner within 28 days. This imposes quite an onerous obligation on trustees and corporate directors to monitor share and unit holdings.

Thursday, 16 June 2016

NEW foreign resident capital gains withholding payments

NEW foreign resident capital gains withholding payments

Be prepared: The following applies to all contracts entered into which will settle from 1 July 2016

The Government’s new “non-final withholding tax” will mean that where a foreign resident disposes of Australian property the Buyer will need to withhold and  remit 10% of the market value of the property to the ATO.

What does it apply to?
The new withholding tax will apply to all transactions for Australian property where the vendor is a foreign person, including options and rights to acquire, except assignments of leases where no premium is paid for entry into the lease.

What is ‘market value’?
Where parties contract at arm’s length, the purchase price is taken as the market value.
Importantly, there is an exception where the market value is below $2million, leaving the vast majority of residential property sales unaffected. REIQ and QLS are likely to release a new edition of the standard contract shortly.
It is the purchaser’s responsibility to remit payment to the ATO from the purchase price. Foreign sellers unaware of this might expect to receive more funds from their sale than they will. Issues could arise where the funds from a sale are intended to be used towards a subsequent purchase, and the funds are short as a result of the withholding. 

What is a clearance certificate?
For sales over $2million, a clearance certificate can be obtained by the seller which provides the certainty for both parties that the purchase price does not include the withholding tax. Using the certificate means no nasty surprises for the seller in that no funds are withheld from the sale proceeds. These certificates can be obtained before listing the property for sale.
The clearance certificate application will be an online process. The ATO will be making it available before 30 June. After the application is lodged, the tax office are predicting it will take days for the certificate to be issued, unless there are irregularities within the system whereby certificates could take up to 4 weeks.

What is the effect of GST?
If the transaction is subject to GST, the withholding will be 10% of the GST-inclusive purchase price less the input credit deduction. This only applies where the purchaser is registered for GST or entitled to an input tax credit.


The tax office has published a range of FAQ’s on the new laws which can be accessed here.


Monday, 23 May 2016

Solar rebates and residential tenancies




The solar rebate scheme entitled a person to 44 cents per kilowatt hour of electricity they fed back into the system via their solar panels. No new applications have been accepted since 2012; however those who signed up before the cut-off date will benefit from the scheme until 2028. To remain entitled, the name on the electricity account needs to stay the same. This can cause issues with leased properties where a tenant moves in and decides to change the account name to their own or switch electricity providers.


Who gets the rebate?
The tariff rebate is paid to the customer that holds the electricity account for the individual premises.
There is nothing preventing a rental property from receiving the feed-in tariff.
However, if the name on the electricity account at the property changes, for example due to a change in tenant, then eligibility for the scheme would cease.

What happens if the tenant gets their own electricity hooked up?
The name on the account changes from the landlord to the tenant, therefore the entitlement to the 44c/kWh rebate ceases.  If this happens on the agent’s watch, a landlord may be very unhappy.  In theory this should not be able to be done as a switch of electricity accounts should require authority from new and outgoing account holders.  We are aware however that this has actually happened without the consent or knowledge of the landlord.  Clarity and confirmation in writing will help protect an agent.

How does the landlord get a return on their investment?
The landlord could increase the rent and say to the tenant ‘you'll be getting free electricity’.


In the event a bloody-minded or ignorant tenant hooks up their own electricity despite the landlord's specific instruction not to, and the landlord subsequently loses their entitlement, provided there is appropriate documentation to create and prove the tenant had this obligation,  the landlord may be able to sue for the loss of the feed-in tariff from the date the tenant switched the account name to 1 July 2028, being the date the legislation is due to expire.  

Thursday, 12 May 2016

Registered or unregistered leases. What’s the difference?




 
Registered or unregistered leases
What’s the difference?

Most people are surprised when they learn that commercial leases may not need to be registered. Nonetheless, it is quite common for even a savvy party to neglect or decide not to register a lease to minimise costs.

Whether a lease must be registered depends on the term of the lease.

Under the Land Title Act a lease for a term of 3 years or less (granted after 24 April 1994) need not be registered, as the rights of a lessee under such an unregistered lease will be protected by the Land Title Act.[1]

A lease for an initial term of 3 years or less doesn’t need to be registered to create a valid lease. However, the option period (if exercised) will not bind anyone else with a registered interest in the property such as a new owner, a bank with a mortgage over the property, or a new lessee.

A lease for a term of more than 3 years must be registered on the title, although it will remain valid without registration.[2] If the lease is not registered, it will be defeated by the interest of a subsequent registered proprietor.  That is, if the building is sold and the lease is not registered, the new registered owner doesn’t have to honour any option to extend the tenancy.

Make sure you are up to date by continuing to follow the Bennett Carroll newsletter, conveniently delivered straight to your inbox.




[1] Land Title Act s 185(1)(b)
[2] Land Title Act s 71

Monday, 9 May 2016

WILLS & ENDURING POWERS OF ATTORNEY FAQ’S



Why do I need a Will?
The main objective of a Will is firstly to make sure that everything that you have managed to gather around you during your lifetime (valuable and sentimental), goes where you want it to go; and secondly to ensure that your family are not left with a mess to sort out at a time of grief and heartache as this is also very expensive


What if person dies with no Will?
The assets go to the next-of-kin according to schedule set out in the Succession Act 1981. Court must appoint an executor which may be a family member or the Public Trustee.


Why can’t the Public Trustee prepare my Will?
If your Will is prepared by the Public Trustee, they will appoint themselves as Executor of your estate. If we prepare your Will you will nominate your chosen person or persons to act as executor of your estate.


Is my current Will valid?
Your current will may be invalid if:
 It is not prepared in accordance with the relevant legislation
 If you marry your will is revoked with certain exception
 If you divorce certain provisions of your Will may be revoked


How can I avoid a challenge to my Will?
By ensuring that your Will is valid, current and has been drawn up by a professional, such as Bennett Carroll. We will advise you on the most effective means of distributing your assets and ways in which assets can be protected.


Why do I need an EPOA?
If you lose mental capacity, without an Enduring Power Of Attorney in place, there may be no one with the legal authority to manage your financial affairs. Your family or advisers would then need to apply to the government in your State or Territory to have someone appointed. This can be expensive and a difficult process.

Who can be my attorney?
You may appoint up to four attorneys and they:
 Must be 18 years of age or over
 Must not be your health care provider (i.e. your doctor, nurse or carer)
 Must not be a bankrupt
 Must not be a paid carer


Why can’t the Public Trustee prepare my EPOA?
The Public Trustee will draw a Power of Attorney for free on the condition that they are appointed your attorney. They then charge fees on transactions carried out on your behalf. A solicitor will charge you a one-off fee for drawing the document and you can choose your attorney.


How does an Enduring Power Of Attorney differ from a General Power Of Attorney?
A General Power Of Attorney ceases to have effect after you lose the mental capacity to make financial decisions. An Enduring Power Of Attorney will continue to have effect whatever your mental capacity.


Do you need to register the Enduring Power Of Attorney?
If your attorney wants to use the Enduring Power Of Attorney to deal with any real estate, the Enduring Power Of Attorney may need to be registered with the Land Titles Office. Even if there is no requirement you may be able to do so voluntarily. By registering it, the Enduring Power Of Attorney
• will be on record as a public document
• will be kept safe from loss or destruction
• may be more easily accepted as evidence that your attorney has authority to deal with your property or financial affairs.


How do you revoke your Enduring Power Of Attorney?

You can revoke your Enduring Power Of Attorney at any time, provided you have mental capacity to understand what you are doing at the time you revoke it.


For assistance, please contact our office on 1300 334 566 or via email info@bcglaw.com.au 

Friday, 6 May 2016

A Mortgagee’s Liability for Body Corporate Debt

A Mortgagee’s Liability for Body Corporate Debt
The Queensland Court of Appeal has recently considered the question of whether the definition of “body corporate debt” encompasses ‘recovery costs’. The Court of Appeal’s answer was essentially “yes”.

This conclusion has significant consequences for the mortgagee of a body corporate or strata title lot, where the owners are not only liable for outstanding body corporate contributions but also the body corporate’s significant recovery costs. Recovery costs usually includes solicitor’s costs of pursuing the debt.

“Body corporate debt” means—
(a)  a contribution or instalment of a contribution;
(b)  a penalty for not paying a contribution or instalment of a contribution by the date for payment;

“Owner” means:
  • (a)  the person who is, or is entitled to be, the registered owner of the lot, and includes—
o    (i)  a mortgagee in possession of the lot


A purchaser from the mortgagee is liable for the costs incurred by the body corporate in seeking to recover outstanding contributions from the existing lot owner regardless of whether those costs have been incurred by the body corporate before the financier becomes mortgagee in possession

Action to take for a solution
From the perspective of the prospective buyer from the mortgagee, before purchasing a property it is prudent to;

  •         search the body corporate records to check not only the amount of any body corporate contributions owing by the mortgagor, but also what steps, if any, have been taken by the body corporate to recover such contributions and the costs incurred in taking such steps.
  •        the buyer should also include a term that the mortgagee is responsible for discharging any “body corporate debt” (including recovery costs incurred by the body corporate).

Liability to pay a body corporate debt is enforceable jointly and severally against the person who is the owner of the lot and a person (including a mortgagee in possession) who becomes an owner of the lot before the debt is paid. If there are two or more co-owners of a lot, the co-owners are jointly and severally liable to pay a body corporate debt in relation to the lot.


Thursday, 5 May 2016

Holding Deposit Money

Disputes about trust money for sales of lots and proposed lots

What happens where a deposit is held in a trust account and, before the amount is paid a dispute arises between the parties to the contract?

A “person having an interest” in the amount does not include th
e agent or solicitor acting for one of the parties in relation to the sale or purchase of the lot.

Where a dispute has arisen or is likely to arise, the stakeholder may give all persons with an interest in the amount a written notice, which explains:
ü  The practice considers that a person is entitled to the amount, and
ü  The stakeholder is authorised to pay the amount to the stated person, and
ü  This will occur on or after a specified date (at least 60 days after notice is given) unless;
û  A proceeding is started by another who disputes the stated person’s entitlement, or
û  Everyone who has an interest in the amount authorise payment of the amount to the stated person before the stated date.


A stakeholder can pay the amount to the stated person if, after the stated date, they are still unaware of the start of a proceeding in relation to the amount.


Importantly, the stakeholder will not be breaching the trust money protection legislation by disbursing the amount in this way.


If the stated person was not actually entitled the amount, the stakeholder is not liable.
The above is merely a process which a firm or agency may choose to follow. A stakeholder is also able to hold on to the amount until;
  1. a)    The Court directs whom to pay the money to, or
  2. b)    All persons having an interest in the amount authorise payment.