Hey All
Looking at an off plan purchase, the agent says has a put and call option. Can someone explain what this is and why it is done, advantages/disadvantages etc.
thx
pw
pw
This will enable the holder to sell the property withou paying stamp duty. The option holder would actually be selling the option. However the vendor is protected in that the purchaser has been locked in, and cannot get out of the contract.
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
PW
I myself have purchased 2 put and call options for land in the last 12 months. whilst they can be profit makers they can also be a pain in the backside. From my understanding (and I am no professional) there are two ways you can onsell the option
1 You can onsell the option for a stated price eg $10000. The purchaser pays you this fee, a letter is sent to the original vendor advising that the option has been taken over by someone else. The purchaser then takes over you option to buy the property under the same terms as you had eg settlement on or before 42 or whatever days post registration (in the case of land). The purchaser only then pays stamp duty on your purchase price. You get your money quicker but the purchaser knows how much you paid for the property.
2 You can advise the original vendor that you wish to have the option rescinded as you have found another purchaser. The new purchaser then goes straight to contract with the original vendor and pays the full price (original purchase price plus option price) and stamp duty on this amount. You don’t get your part of the money until settled. This sometimes incurs extra gst which you have to pay on the difference in purchase prices.
Make sure you have a solicitor that knows about put and call options as ours didn’t and we went round and round in circles (stressful and frustrating).
Can be a good thing if you pick a good property, one that will be easy to onsell but if you pick a dud as in our second purchase you have to go through with settlement.
Hope this helps
SS2306
Hi there,
2 You can advise the original vendor that you wish to have the option rescinded as you have found another purchaser. The new purchaser then goes straight to contract with the original vendor and pays the full price (original purchase price plus option price) and stamp duty on this amount. You don’t get your part of the money until settled. This sometimes incurs extra gst which you have to pay on the difference in purchase prices.I think it depends on how the tax department sees it and how your accountnat has put it all together…. I believe you can sometimes just pay tax on an income realised…. as not capital gains tax should be payable by yourself since you only had control of the property with the right to nominate a purchaser & since you never owned it at all it is not classified as a profit via capital gain. – any comment anyone on this?
Cheers-Kiwi!tax would be payable on any profit
Terryw
Discover Home Loans
Mortgage Broker
North Sydney
Click below to email meTerryw | Structuring Lawyers Pty Ltd / Loan Structuring Pty Ltd
http://www.Structuring.com.au
Email MeLawyer, Mortgage Broker and Tax Advisor (Sydney based but advising Aust wide) http://www.Structuring.com.au
depends how the agreement is written , with at the expiration of the term you must settle the property or your nominated buyer, then you are locked in , but it is possible to place a purchaser into the property and you can make a profit by the variances. just remember if the purchaser does not settle you are liable so ensure you have a full 10%deposit.you can sometimes slip a subject to .. in the agreement so you have an out clause
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