Hello All, I am new so apologies in advance if I don’t make sense or if the details of my question are vague. I’m about to purchase an investment property (to be rented) which is an existing residential property that’s about 40 years old or there abouts. It’s a normal house, nothing odd, nothing special and as far as I understand, this is a “normal” property purchase, nothing special, run of the mill COS/Section 32 (I think!). However there is section in the Contract with covers GST as follows:
Goods and Services Tax (If applicable)
12. The parties acknowledge and agree:
a. That the price in the Particulars of Sale is the value of the land described in this contract and does not
include Goods and Services Tax payable under the GST Law and
b. That if the purchaser becomes entitled to possession of the land on or after the 1/7/2000 then the
purchaser shall on the date for payment of residue pay to the vendor any Goods and Services Tax
payable in addition to the balance due under the Contract of Sale and
c. The failure by the purchaser to pay any GST when required shall be a fundamental breach of the
Purchaser’s obligation hereunder.MY QUESTION IS: IF I BOUGHT THIS PROPERTY FOR SAY $500,000, DO I THEN HAVE TO PAY 10% GST (IE. $50,000) ON TOP OF THE $500,000 SALE PRICE? SO MY TOTAL COST WOULD BE $550,OOO!? I NOTICE THAT THE VENDOR SELLING THE PROPERTY APPEARS TO BE A COMPANY OR FAMILY TRUST, IE.
*FAMILY NAME* INVESTMENTS PTY LTD
*FAMILY NAME* FAMILY TRUST
ADDRESS
DIRECTORS NAMES(NB I’VE PUT *FAMILY NAME* TO MAINTAIN THE CONFIDENTIALITY/PRIVACY OF VENDORS WHICH I HAVE NO RIGHT TO DISCLOSE ON SUCH A FORUM!)
DOES THE FACT THAT THE VENDOR SEEMS TO BE A FAMILY TRUST CHANGE THE GST SITUATION? I NOTICE THAT THE CLAUSE SAYS “GOODS AND SERVICES TAX (IF APPLICABLE)”, I PRESUME (HOPE) THE EXAMPLE I’M PRESENTING ABOVE IS A CASE OF THIS BEING “NOT APPLICABLE”? IF SOMEONE COULD HELP ME WITH MY QUERY, I WOULD GREATLY APPRECIATE IT. THANKS ALL IN ADVANCE, ANDY.
If the property is subject to GST then you would have to pay the vendors 10% extra. an extra $50k in your example possibly.
You had better seek legal advice before signing 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
Terryw, thanks for your reply. When u say “If the property is subject to GST then you would have to pay the vendors 10% extra”, when would a property be subject to GST? Everything I’ve been reading is indicating that the only properties subject to GST are new properties which have just been built and never lived in before, does that sound correct to you? This property is at least 40 years old and had tenants renting it just before it was up for sale/auction. What are your thoughts? PS, Im in the process now of finding a solicitor to review the COS. Thanks again.
Commercial. Substantially renovated property. residential in some instances can all be subject to GST.
If the property is residential housing, not new, then GST probably won’t apply. Best to ask the vendor to remove the clause if that is the case.
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
Terryw, thanks again for your prompt response! Yes, if it’s not applicable, just to be sure, I will strike out the clause on all copies of the COS that I sign. I really appreciate your help with this issue. Kindest Regards, Andy.
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