Changes to REIQ Contracts
Is 13 a lucky number?
The QLS and the Real Estate Institute of Queensland have released the 13th edition of the standard “Contract for Houses and Residential Land”.
The contract and the standard “Contract For Residential Lots In A Community Titles Scheme” (now in its 9th edition) has been updated as a result of changes to the Fire and Emergency Services Act 1990, introduced by the Fire and Emergency Services (Domestic Smoke Alarms) Amendment Act 2016.
The Changes are the same in both contracts with Clause 1 Definitions going from:
“Compliant Smoke Alarm” means a smoke alarm complying with sections 104RB (2) or (4) of the Fire and Emergency Services Act 1990;”
to
“Compliant Smoke Alarm” means a smoke alarm complying with the requirements for smoke alarms in domestic dwellings under the Fire and Emergency Services Act 1990;”
Not a big change but as always the latest editions of the contracts should be used to avoid any potential issues.
Foreign Buyers Stamp Duty Surcharge
From 1 October 2016 the foreign persons acquiring residential land in Queensland will pay a 3% stamp duty surcharge on entering into any new transactions.
What is Residential Land?
Residential land is land that is or will be solely or primarily used for residential purposes, and on the land:
• there is or will be a building designed or approved by a Council as a single family residence;
• there is or will be a number of lots in a strata title building; and
• an existing building will be renovated to be a house or apartment complex,
Who are Foreign Persons?
• Individuals who are not Australian citizens or permanent residents (including the Subclass 444 visa New Zealanders);
• Companies incorporated outside Australia, or Australian companies in which foreign persons have an interest of 50% or more; and
• A trust where 50% of the "trust interests" are held by foreign persons. For a unit trust this will simply mean looking at the unit register, and in the case of discretionary trusts, identifying the "takers in default" to see if any are foreign persons. The trust interest is simply the proportion available to each taker in default - in a case where there were two takers in default, if one was a foreign person the trust would be a foreign person also.
Are Indirect Acquisitions Caught?
Yes. Any acquisition by a foreign person of an interest in a landholder which has an interest in residential land will be subject to the surcharge where the acquisition is otherwise dutiable.
When does AFAD Apply?
It applies to any contracts entered into on or after 1 October 2016, whether or not pursuant to a pre-existing option.
How is AFAD calculated?
Under section 244 of the Act, AFAD is imposed at the rate of 3% on the dutiable value of the transaction (usually the purchase price) to the extent of the foreign person’s interest in the AFAD residential land. For example, if a foreign person acquires a residential home for $1 million, they would need to pay an additional $30,000 in AFAD on top of their usual transfer duty liability.
• Where AFAD applies, the top marginal rate of duty in Queensland will be 8.75%.
Within 30 days of a transaction to which AFAD applies, the foreign acquirer must lodge an AFAD statement in the approved form with the Queensland Office of State Revenue. A failure to lodge this statement is an offence.
New Tax On Sale of $2 Million+ Properties
The Issue
The Federal Government is concerned that property owners, particularly foreign persons are not paying Capital Gains Tax on the sale of property.
The Law
On or after 1 July 2016 on the sale of Affected Property, the Buyer will have to withhold 10% of the sale price and pay that to the Australian Taxation Office (ATO) unless the Seller has a Clearance Certificate.
Residential Properties under $2 Million at market value will not be Affected Property.
If the withholding tax is not paid then the ATO may pursue the Buyer for the tax that should have been paid as well as interest leaving the Buyer to recover that money from the Seller like the current GST regime.
• Affected Property
This withholding is limited to taxable Australian property, being:
o Real property in Australia – land, buildings, residential and commercial property;
o Lease premiums paid for the grant of a lease over real property in Australia;
o Mining, quarrying or prospecting rights;
o Interests in Australian entities whose majority assets consist of the above such property or interests – this is called an indirect interest;
o Options or rights to acquire the above property or interest.
• Exclusions
If a foreign resident Seller falls within one of these categories then the 10% withholding tax is not applicable:
o Real property transactions with a market value* under $2 million, ensuring that the vast majority of residential house sales will be unaffected by this measure;
* Note: if a sale price negotiated between a Seller and a Buyer is on an arm’s length basis, then the sale price may be used as a proxy for market value.
o Transactions listed on an approved stock exchange;
o The foreign resident Seller is under external administration or in bankruptcy.
The Solution
If a Seller doesn’t want 10% of the sale price given to the ATO the Seller will need to get a Clearance Certificate before settlement.
Only a Seller who is not a foreign person for taxation purposes can get a Clearance Certificate.
The Clearance Certificate confirms that the withholding tax is not to be withheld from the transaction.
The Seller may apply for a Clearance Certificate at any time they are considering the disposal of Affected Property. This can be before the property is listed for sale. The Clearance Certificate will be valid for 12 months and must be valid at the time the Certificate is given to the Buyer prior to settlement.
The Application for a Clearance Certificate (as will the Buyer’s payment protocol) will be on line and the ATO will set up that link on 27 June 2016 but for now click here to read the ATO fact sheet ato.gov.au/FRCGW
The Buyer of Affected Property should withhold the withholding tax from the Seller at settlement and pay that to the ATO unless the Seller provides a Clearance Certificate. If the withholding tax is not paid then the ATO may pursue the Buyer for the tax that should have been paid leaving the Buyer to recover that money from the Seller like the current GST regime.
Suggested Action
If you are buying or selling a property over $2 Million be very careful or you may find yourself paying penalties and interest to the ATO.
If you are the Buyer of an Affected Property you must pay the withholding tax to the ATO without delay as penalties and interest may apply to late payments.
If you are the Seller of an Affected Property get a Clearance Certificate and give that to the Buyer before settlement.
New Act to Control Property Sales
The Property Agents and Motor Dealers Act will be gone in the next few months.
The Qld Gov’t has passed the new Property Occupations Act.
Forms 30c and Form 14: GONE
The warning statement (Form 30C) and the BCCM Information Sheet (Form 14) will be replaced by the insertion of particular nominated words in the reference schedule failing which the seller or the seller's agents commits an offence and is liable for a penalty of up to $22,000. The buyer has no right to terminate.
Cooling-off period: STAYS
Nothing will change for mums and dads (except that if the property is bought after the property is passed in at auction by a registered bidder by 5pm on the second clear business day after the auction), but it won’t apply where the buyer is:
• a publicly listed corporation or a subsidiary of a publicly listed corporation;
• the State or a statutory body;
• the buyer is purchasing at least three lots of the same time, whether or not in the one contract.
Under PAMDA, the cooling off provisions benefiting residential buyers did not apply to properties sold by auction. That exemption has now been extended under the Act in respect of contracts. Care will need to be taken to ensure the registered bidder (and not a related entity) is the buyer
Definition of residential property: SIMPLIFIED
Basically if it looks and smells like a 'Residential Property' it is one.
Property developer licences: ABOLISHED
This nonsense is no longer but property developers still need to give certain disclosure information about benefits in an approved form.
Licensed director of a real estate office: GONE
Under the PMDA a company had to have one director a real estate licence now a company will be able to hold a real estate agent's licence provided it engages a licensed real estate agent to be in charge of the business.
No maximum commission: GONE
There will no restriction on the maximum commission rates on the residential property transactions that can be charged.
Vacant land notices: GONE
This nonsense where the agent had to give buyers of non-residential vacant land a notice saying the land cannot be used for residential purposes will be removed.
GST Changes for Residential Premises
Buyers need to be careful of the ATO’s new definition of residential premises.
Previously the ATO looked subjectively at the use of the premises but will now take an objective view and, regardless of the term of the occupation, it will look at whether the premises are capable of being occupied as a residence.
The parties may think that GST is payable on the sale and the ATO may later rule that as a property was capable of being occupied as a residence that it was a GST free transaction and the buyer would not be able to claim an input tax credit or recover the GST from the seller.
There has also been a recent decision in the Federal Court where a party thought they were acquiring residential premises through a GST free supply of a going concern where the reverse applied and GST was payable.
If you are thinking about buying any property other than as your place of residence you should seek expert advice in respect of these new GST risks before entering into the contract or registering for GST if not already registered.
Landlord's Obligations
The Residential Tenancies Authority has just prosecuted a property manager for breaches of his obligations as a landlord's agent.
The agent was fined $4,000.00 for breaches of his duties when acting as the agent for his father who was the landlord.
The agent took a bond from the tenant but didn't lodge it with the RTA as required and he did not provide the tenant with an entry condition report. The report must be completed at the start of a tenancy and the agent must sign it and have it signed by the landlord and the tenant and give the tenant a copy of the fully completed and signed report within 14 days.
The agent also failed to give the tenant a booklet which explains their rights called "Renting a House or Unit in Queensland" booklet.
A landlord's agent is required to do these things to protect both the interests of the landlord and the tenant and if you are either a landlord or a tenant you should make sure that the landlord's agent does and if not take the matter up with the agent. Genuine mistakes happen but if the agent is still not being helpful contact the Residential Tenancy Authority.
Review of the Land Sales Act
The Qld Gov’t is proposing to amend the Land Sales Act 1984
The Land Sales Act deals with the sale off the plan land.
Aside from tidying up the out of date language used it is looking at the 10% deposit maximum rule for “off the plan land” contracts.
The Gov’t has flagged the possibility of removing that limitation but also the possibility of amending the Property Law Act provisions that, in effect, limit the deposit to 10 % in regards to all contracts.
These changes would have a significant effect of real estate deals in Qld so watch this space.
First Home Owners Grant Changes
Background
Currently a First Home Buyers Grant of $7,000 is available.
The State Government has issued its 2012-2013 Budget and announced changes to the First Home Buyers Grant.
This will affect buyers and builders as and from 12 September 2012 so the C-Property Conveyancing wants to help you understand the changes so that you properly advice your clients.
The Change
The Budget introduced the First Home Owner Construction Grant (FHOCG), which will be administered under the First Home Owner Grant Act 2000.
Removal of Current Grant
The current $7,000 First Home Buyers Grant will remain available for established home purchase contracts dated before 11 October 2012.
It will not be available on and after 11 October 2012.
The New Grant
The new Grant is available to first home owners who will be buying or building a new home.
This Grant of $15,000 is available for:
• contracts to buy a new home (including off the plan) dated on or after 12 September 2012
• contracts to build a new home dated on or after 12 September 2012
• new homes being built by an owner–builder where the date the foundations start to be laid is on or after 12 September 2012.
A new home is a home that:
• has not been previously occupied as a place of residence
• has not been previously sold as a place of residence
or
• is a substantially renovated home (in certain circumstances).
The $15,000 Grant will not be available:
• if the contract replaces an existing contract made before 12 September 2012
• for new homes where the contract is dated before 12 September 2012
• for owner–builders where the date the foundations start to be laid is before 12 September 2012
• established homes.
Duty on Buying an Existing Home
The transfer duty concession when buying an established home is unaffected and remains in place.
Grants and concessions available to first home buyers
Grant or concession For purchase of Value What has changed?
First home owner construction Grant New home $15,000 • Increase from $7,000
• For contracts to buy or build, contract date must be on or after 12 September 2012
• For owner–builders, laying of foundations must start on or after 12 September 2012
First home owner Grant
Established home $7,000 Contract date must be before 11 October 2012
First home concession
New or established home Applies to homes up to $550,000 No change
First home vacant land concession
Vacant land on which a first home will be built Applies to land up to $400,000 No change
Home concession
Second or subsequent home Saving on duty payable of up to $7,175 No change
Questions
If you have any questions about the changes the C-Property Conveyancing will be happy to help. Simply contact the C-Property Conveyancing office you normally deal with or phone 3221 8000 or stevenjohnson@c-property.com.au.
The C-Property Conveyancing is here to make things easy for you.
$10,000 grant for new homes
The QLD Government has announced in the 2011/12 budget a $10,000 building boost for new homes built in Queensland.
The key points are:
• the grant is only available on properties worth less than $600,000.
• the grant is available to people building a house, buying a house and land package or buying new properties off-the-plan.
• the contract must entered between 1 August 2011 and 31 January 2012.
• off the plan buildings need to be completed by July 2013.
• the grant is in addition to the $7,000 first homeowners’ grant ( if applicable).
• the grant is available for all buyers i.e. homes and investments.
• a person can receive the grant on multiple properties.
If you are thinking about buying or building a new house you may want to consider waiting until after 1st August to take advantage of the $10,000 building boost.
Charging Tenant's For Water
Landlords’ can only make tenants pay for their own water consumption if the property is water efficient.
The Residential Tenancies Authority recently issued this advice.
Under the legislation, landlords can pass on full water consumption charges to tenants if the rental property is individually metered, water efficient and the tenancy agreement states that the tenant must pay for water.
A property is considered water efficient if internal cold water taps, single mixer taps and showerheads have a maximum flow rate of nine litres per minute and toilets are dual flush and don't exceed 6.5 litres on full flush, and 3.5 litres on half flush.
The easiest way to check if fixtures meet the standard is to look for a Water Efficiency and Labelling Standards (WELS) rating of three stars or higher which can be found on products made since 2005.
Outdoor taps, bath tub taps and taps for appliances such as washing machines and dishwashers are excluded.
Arrangements for water charging need to be negotiated at the start of the tenancy and included in the tenancy agreement.
The presence of water efficient devices should also be noted on the Entry Condition Report and the landlord or agent should be able to demonstrate that the devices are water efficient.
Copies of plumbing reports, paperwork from the State Government's Home WaterWise services, receipts, packaging and warranties or instruction manuals for taps and showerheads can all be used to prove water efficiency.
Taps and toilets should be well maintained and any reports of leaking pipes investigated promptly.
The Queensland Civil and Administrative Tribunal (QCAT) recently refused a landlord's application for reimbursement of excess water usage. The landlord took the matter to appeal and was refused as a leaking toilet was found to have been responsible for excess water usage at the property.
Flood Delays New Pool Safety Laws
The introduction of tough new pool safety laws has been delayed in the wake of Cyclone Yasi and widespread flooding throughout the state.
New laws introduced in December last year required non-shared pools to be inspected and issued with a Pool Safety Certificate before being leased.
The Queensland Government now allows rental properties with non-shared pools to be leased until 8 July this year without the need for a Pool Safety Certificate.
Property managers and landlords need to issue tenants a Notice of No Pool Safety Certificate available from the Department of Local Government and Planning. The form tells the prospective tenant that the pool may not comply with current pool safety standards and may pose a risk to children.
For shared pools, where a pool is available to two or more occupants, such as a block of units, the body corporate has until 30 November next year to obtain a Pool Safety Certificate.
Where a Pool Safety Certificate has not been issued, new tenants again need to be provided with a Notice of No Pool Safety Certificate stating that the pool may not meet current standards.
If you have a pool on a property owned by you don’t forget to go online, www.dip.qld.gov.au/poolsafety and register the pool by 4 May
Warning Statements
If the wrong Warning Statements are used on a residential contract it may result in a cancellation of the contract.
All contracts for the sale of residential land must have attached what is called a PAMDA Form 30c Warning Statement.
The correct form under the Property Agents and Motor Dealers Act 2000 is Version 6 effective from 1 October 2010.
If the contract is for residential property that is part of a Community Title Scheme what is called a BCCM Form 14 must also be attached.
The current form under the Body Corporate and Community Management Act 1997 is Version 6 effective from 1 October 2010.
Agents, Buyers and Sellers should pay careful attention to this.
Pool Safety Certificates
The REIQ Contracts have been recently overhauled to give effect to the Swimming Pool Safety Inspection and Certificate Regime which commenced on 1 December 2010.
For more information please read our brochure.
If you are buying or selling a property that has a pool or you own a property that has a pool, then this information is important.
Real Estate Agents and the Law
There have been two recent decisions regarding the eligibility of persons to recover commissions or fees on the sale of properties.
For more information, please read our brochure.
If you have any concerns or need our assistance regarding real estate commissions, please contact us on 3221 8352.
Important new changes to Australia's foreign investment policy
The Australian Government has announced it will shortly amend its Foreign Investment Policy.
This amendment will have a material effect on residential land buyers.
The big change is that temporary residents may purchase second hand dwellings. This took effect from 18 December 2008, but will change again shortly.
For more information please read our brochure
If you have any concerns or need any assistance regarding Australia's Foreign Investment Policy please contact us.
STAMP DUTY CHANGES
The Background
When the Qld Treasurer, Andrew Fraser, handed down the 2008/2009 State Budget it outlined various changes to stamp duty associated with Queensland properties.
The intent of the new structure was to generally improve competitiveness with other states and assist First Home Owners with the affordability of buying their own homes.
While the budget contains reductions in stamp duty for some home buyers and retirement village residents, there is still a sting in the tail in the form of increased rates which will affect transactions over $590,000.00.
The Good News!!
Concessions and exemptions for home buyers and retirement village residents:
1. Abolition of Mortgage Stamp Duty;
2. An increasing in the threshold for the firm home buyers duty exemption from $320,000.00 to $500,000.00;
3. An increase in the ceiling for the principal place of residence concession from $320,000.00 to $350,000.00; and
4. An extension of the principal place of residence concession to retirement village residents who adopt lease and sub-lease occupancy arrangements, which has never applied before.
When combined with the new duty rates, these concessions and exemptions will reduce the duty payable on homes valued between $320,000.00 and $1,000,000.00.
The Bad News!!
As the new rates lead to savings for transactions under $590,000.00 they have lead to increased rates of stamp duty for transactions over $590,000.00 , with the top marginal rate increasing from $4.50 to $5.25 per $100.00. ie. For a transaction of $750,000.00 stamp duty has risen from $26,225 to $26,775.
C-Property Conveyancing’s Help
C-Property Conveyancing has developed comprehensive tools for use by you in assisting calculating stamp duty payable by your clients to make things easy for you. Should you have any further queries please do not hesitate to contact us.
Welcome to C-Property Newsletter
Welcome to the C-Property news articles.
Stay tuned for more news.