Clause in contract

From: Jay Hunter


I have received a contract for a property I'm interested in... and one of the clauses/special conditions is a little strange.

Can someone explain the purpose of such a clause and how i might affect me as the purchaser ?

I plan to live in the property as my residence but may decide to rent it out down the track. I might also want to rent the car space of the building... not sure if this is relevant ? I've run the contract past a solicitor and he says not to worry about it... but i thought i would post the question before i do anymore.

Thanks for your help!!

Sale of Residential Premises
In this clause

"GST" refers to the goods and services tax under A New Tax System (Goods and Services Tax) Act 1999 ("GST Act") and the terms used to have the meaning as defined in the GST Act.

The vendor is, and has been, occupying the property as a residence and it is residential premise under the GST Act.

The Purchaser agrees, on and after completion of this sale, to use the property predominantly for residential accommodation

In the event of the vendor being liable for GST, because of the purchaser's failure to comply with 37.3
The purchaser agrees to pay to the vendor, within 14 days after the vendor's liability for GST on this sale is confirmed by correspondence or assessment from the commissioner, the amount of the GST, including any additional penalty and interest
The vendor shall deliver to the purchaser, as a precondition of such payment, a tax invoice in a form which com pliess with the GST Act and the regulations
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Reply: 1
From: A. .

It appears that the clause states that the vendor is not liable for GST as long as he/she has used the property as their residence. However if it is determined that the vendor has not been using the property as their residence and is found to in breach of this you may liable for any GST they have to pay.
I suggest you consult your solicitor regarding this as it is not usual condition of a contract of sale. Good Luck.
(This reply is not to be deemed as legal advice).
Ashley - Low Cost Conveyancing Services.
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Reply: 1.1
From: Sim' Hampel

Sounds like the vendor is trying very hard to cover their arse in case they are deceived by the purchaser as to the nature of the intended usage of the property.

Note that if the transaction is regarded as commercial in nature, then the vendor is required to submit 1/11 th of the purchase price to the ATO for GST.

But say the purchaser signs a contract with the vendor that states that the sale is of property for primarily non-commercial residential usage and hence is input taxed.

If this then turns out to be false due to deception on the purchasers part, surely the vendor has an out automatically ? Or will the ATO turn around to the vendor and say "bad luck, you owe us 1/11th of the purchase price" ? That's nasty if they do.

I definately suggest you talk you a solicitor about this !

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Reply: 2
From: Dale Gatherum-Goss


I had a solicitor talk to me about these clauses last week, Apparently, they are becoming more common and we can expect to see more of them in the future as solicitors try to protect themselves.

As I mentioned yesterday in another post. If you don't like the rules, don't play.

So, if you are not comfortable with the clauses, just cross them out and initial the crossing out. Tell the agent, that you want to buy the property, but, you do not want this sort of uncertainty hanging over your head.

Oh, and rest assured that the sale should be free of GST given the circumstances that you mention.
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Reply: 3
From: The Wife

HI Jay,

Agree with everyone else so far,

but would just like to add here,

that your solicitor said dont worry about it, and you ARE worried about it, next time, what you need to do, is to say "Hold on, back up, i AM worried about, I need it explained to me".

That way, if your gut instinct tell you your solicitor is still wrong, you have a better sense of judgement, and can then seek further advice.

~Life is a daring adventure, or nothing at all~
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