Hi there guys,
I have just contracted (to sell)a commercial deal that i gave a higher price on the contract and then offered a discount to buyer, if settled by a certain date.
Im told i only need to declare(for tax) the actuall price received for the property not the contract price
on the front page.
Part of me is not sure if this is correct.
Are there any accountants there who have come across this before?Thanks alot
Luke
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
So you have given a rebate? This is common and you must take the rebate into account – I am not sure where you would do this, but think the sale price would be adjusted down to reflect the actual price paid.
Terryw | 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
Hi Terry,
I didnt know it was classed as a rebate.
The idea of the price reduction is so the buyer can borrow more
due to the bank lending on the (higher) front page contract price.
Then we give a reduction on settlement if settled by a certain date (written on the contract.)What are you saying by you must take this into acct?
thanks man
Luke
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi Luke
Sounds like a classic rebate.
Say you sell for $100,000 with a $20,000 rebate, then the real sale price is $80,000.
Terryw | 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
Ok thanks alot !
Do you know if i can declare the price received for the property (after rebate)at tax time
or will i be liable for the front page contract price?
Im just not keen to pay tax on a figure that i didnt actually receive for the property .In yr experience will the bank still lend on the higher price when finding out a rebate will be given on settlement?
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
I'd be careful….the buyer or their agent is endeavouring to commit a fraud. If they are prepared to lie to the bank (they are clearly going to hide the "rebate") or subsequent purchasers, I would be taking any of there other respresentations with a pinch of salt.
To each their own, but I don't think it is ethical to facilitate someone else cheating – whoever they are cheating. I'm sure you would be pissed if you want to purchase a property and the val. came back OK based on previous (padded) sales and you were lulled into paying too much.
That said, your direct risk is that, if the ATO conducts the appropriate searches, they will not match the sale amount you declare. When the ATO gets a hit, they are likely to look at all your taxation affairs – not just this transaction – and given they have investors on the radar this year…..
Hi Yossarian,
i dont see how it is fraud ,as long as the valuation comes back at the contract price,i would have thought,but i could be wrong.
I think yr meaning it may be classed as fraud if the buyer doesnt tell the bank that they are actually paying less?Would love to hear from others who may have come across this???
thanks alot
Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
Hi WC
lets think of an example. house sale price is $80,000, but the contract is bumped up to $100,000 with a $20,000 rebate if the settlement occurs by xx/xx/2008. Bank sends valuer out and he sees the contract price as being $100,000. He may value it at this amount. Bank then lends 80% which is $80,000. So the purchaser is getting 100% finance – with No LMI too. Bank thinks it is 80% LVR.
That is why some consider it to be deceiving the bank.
Back to the ATO side of things. You received $80,000 in the end, so you should pay tax on the $80,000 figure.
BTW, the purchaser would pay more stamp duty in something like this.
Terryw | 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
Thanks guys for yr comments,
It brings up another issue as to valuations too,
,what has what a buyer is paying for a property got to do with what its valued at ????
I think its wrong that often you have to tell a valuer what yr actually paying for a property before they do a valuation.
I reckon thats why you pay them do a valuation??!!!!Then its up to them to decide what its actually worth from their experience!!!
anyway,ill get off my high horse now.Luke Taylor | Hope Property Investing
http://hopepropertyinvesting.com
Email MeProperty Support,Strategist and Buyers Agent
well, by definition the value of a property is what someone will pay for it – so it should be a big factor, but I know what you are saying. It is always possible to start at a higher amount and then get discounts after the valuation has been done.
Terryw | 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
hi guys, i came across this thread and thought id add to it instead of starting a new one as its of a related topic.
Q) as a buyer, is offering the vendor asking price provided they give a rebate instead of negotiating the price down considered fraud?
the situation!
the area im in, prperty prices have flatterned or in some cases slightly dropped. as sales are slow those that need to move are getting desperate for a quick sale so in some instances sell below market value (yes i know market value is what someone is prepared to pay for it, but you know what i mean)some of theses are very close to cash flow pos but raising the 5-10% deposit is the problem to continue buying. so as an example:
property for sale for 300000 seems a fair price but market has slowed and the seller is motivated and the property is cash flow pos at this price.
i offer the 300000 provided i get 5% cashback
i can put down a 10% deposit of purchase price from my own funds
i have no intention of hiding the cash back from the bank and would be eligable for both a 90 and 95% lvr loan
1)if the bank sees the property as 300000 then i could 95% loan and the 5% rebate which was my depsit
2)if the bank sees it at the rebate value than i would put down 10% of the purchase price which would leave me with 95% lvr in te banks eyes on which it is happy to lend?
any thoughts would be most appreciated
regards
pete
i now understand that banks will usually take the contract price – rebate as the cost of the purchase for lvr.
are the any lenders who will consider lending on the contract price?
im also aware that point 2 on my previous post has no benefit to the costs involved compared with negotiating a lower price to the samevalue as the rebate.
does anyone know of any alternatives to get around this?
cheers
pete
fraud is a dishonest act done with the purpose of deceiving. Rebates are offered all the time for the sale of many products – i just bought a laptop with $100 cashback after settlement.
If you tell a lender you are buying for $X, but are buying for $Y, that may be a different thing. You are deceiving the bank into lender more – and obtaining a financial benefit.
I know of no lender that will lend based on higher of valuation or purchase price. There were a few smaller private type lenders who did this before, they may still do so, but the lvr was around 70%
Terryw | 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
well will this work you buy house at $300k you pay stamp duty on $300k the vendor pays tax on $300k (if any) the banks loan you 90-95% on the $300k its also valued at $300k
Now the vendor gives you a gift of $15k Or $30k surely thats just like receiving a plasma tv for your christmas presentkeiko wrote:well will this work you buy house at $300k you pay stamp duty on $300k the vendor pays tax on $300k (if any) the banks loan you 90-95% on the $300k its also valued at $300k
Now the vendor gives you a gift of $15k Or $30k surely thats just like receiving a plasma tv for your christmas presentIf it is a contractual obligation to provide the "gift" as a condition of initially paying $300K then it needs to be disclosed to the lender.
You can dress it up any way you like but If it quacks like a duck..and walks like a duck…it's a duck
Hopefully it doesn't quak then.
If the rebate is clearly shown in the contract and the whole contract is given to the bank, then there really is no fraud being committed. The rebate doesn't need to be highlighted in pink pen. As long as it appears in the contract then the bank can't claim to have been deceived.
Just my thoughts, which are no substitute for good, independent legal advice etc etc.
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