GST on old resendtial unit sale

almostthere

almostthere

Hi All,

I need an urgent advice with my new PPOR purchase.
I am purchasing a PPOR which is an established residential unit built around 1970. Will there be any GST applicable on this sale ? If yes, how much will be GST applicable ?

The reason for my concern is, the sale contract has the following clause which the vendor is not willing to remove :
"the purchase price is not inclusive of GST. If the vendor becomes liable for any GST, the purchaser to pay GST equivalent amount."

Can you please help in this regard?

Thanks in advance.
The cooling off is expiring tomorrow so appreciate your response on this.
 
Is the vendor a company?

Why hasn't your solicitor struck out this clause? I know people who have walked when the vendor wanted the gst (over $200k worth).
 
almostthere said:
Hi All,

I need an urgent advice with my new PPOR purchase.
I am purchasing a PPOR which is an established residential unit built around 1970. Will there be any GST applicable on this sale ? If yes, how much will be GST applicable ?

The reason for my concern is, the sale contract has the following clause which the vendor is not willing to remove :
"the purchase price is not inclusive of GST. If the vendor becomes liable for any GST, the purchaser to pay GST equivalent amount."

Can you please help in this regard?

Thanks in advance.
The cooling off is expiring tomorrow so appreciate your response on this.
Click to expand...

What does your lawyer say?

(probably see: "ask your accountant":))

Look at the GST Act for the answer. http://www.austlii.edu.au/au/legis/cth/consol_act/antsasta1999402/
 
Request the vendor:

a. Delete the clause;
b. Lower the contract price by 10% in the event you have to pay GST later (unlikely);
c. Walk.


pinkboy
 
almostthere said:
Hi Pinkboy, I already requested the clause to be deleted and he didn't agree that's why the thread
Click to expand...

I know why you put the thread....I read it with my own two eyes....

.....but if you show you're gonna walk, and the vendor sees that, they might come to their senses and agree the clause is in fact not required.

pinkboy
 
pinkboy said:
I know why you put the thread....I read it with my own two eyes....

.....but if you show you're gonna walk, and the vendor sees that, they might come to their senses and agree the clause is in fact not required.

pinkboy
Click to expand...

Hi Pinkboy,

Thanks for your response but the purpose of this thread was to find out if there would be any GST implications in this case or not because that will help me decide my next course of action.
 
The reason they are refusing to amend it is probably because the vendor or his/her/its conveyancer doesn't understand GST. Its probably a lawyer as most conveyancers would know the GST clauses (but maybe not fully understand them). The vendor wants to cover his butt.
 
Terry_w said:
The reason they are refusing to amend it is probably because the vendor or his/her/its conveyancer doesn't understand GST. Its probably a lawyer as most conveyancers would know the GST clauses (but maybe not fully understand them). The vendor wants to cover his butt.
Click to expand...

Thanks Terry.

So from section 40-c

Sales of residential premises

(1) A sale of * real property is input taxed , but only to the extent that the property is * residential premises to be used predominantly for residential accommodation (regardless of the term of occupation).

(2) However, the sale is not input taxed to the extent that the * residential premises are:

(a) * commercial residential premises; or

(b) * new residential premises other than those used for residential accommodation (regardless of the term of occupation) before 2 December 1998.

If I understand this correctly, this sale will be input taxed (no GST applicable) because

(a) it is not a commercial residential premise; and
(b) it is not a new residential premise

Is this right understanding ?
 
The vendor may be liable for GST if there has been substantial improvements or subdivision to your "established residential unit" that makes it new residential premises.

Therefore the vendor has added the term to your purchase contract that you agree to cough up an extra 10% to cover the vendor in case that liability arises.

You don't usually get this issue when purchasing a main residence from a private owner.
 
Rob G. said:
The vendor may be liable for GST if there has been substantial improvements or subdivision to your "established residential unit" that makes it new residential premises.

Therefore the vendor has added the term to your purchase contract that you agree to cough up an extra 10% to cover the vendor in case that liability arises.

You don't usually get this issue when purchasing a main residence from a private owner.
Click to expand...

Thank you for your input.

To my knowledge,

1. There are no renovations on the property. Most of the area are in original condition.
2. Vendor is a private owner and this unit was his PPOR prior to sale.
3. The last sale on the property was around 14-15 years back.
 
almostthere said:
Thank you for your input.

To my knowledge,

1. There are no renovations on the property. Most of the area are in original condition.
2. Vendor is a private owner and this unit was his PPOR prior to sale.
3. The last sale on the property was around 14-15 years back.
Click to expand...

Well obviously the person you need advice from is your solicitor and I am in no way qualified to comment, but hey, as a lay person I can't see how gst would be applicable. I have seen a few contracts with this in over the years, it's a frustrating hurdle to overcome at times, but doesn't automatically mean gst will apply, as mentioned it is a but covering excercise from the vendor possibly included in ignorance. You really want advice from your solicitor though. I could be wrong (obviously)
 
I can't see how a solicitor can help here, we know what the law is, it's just a question of whether you want to take on the risk.
 
almostthere said:
Thank you for your input.

To my knowledge,

1. There are no renovations on the property. Most of the area are in original condition.
2. Vendor is a private owner and this unit was his PPOR prior to sale.
3. The last sale on the property was around 14-15 years back.
Click to expand...

Is the vendor registered for GST?

I can't see GST being an issue here. It's the vendor's PPOR, it's not 'new' housing and there is no enterprise.

The agent should have advised the vendor to strike out the clause, as it's not applicable.
 
dan c said:
Is the vendor registered for GST?
.
Click to expand...

Hi Dan,
Thanks for your response. You seem to have raised a valid point here..
From the ATO website :

Is the vendor registered for GST?
GST can only apply to the sale of a property if the vendor is registered or required to be registered for GST purposes. As real property is generally supplied at the time of settlement, GST can only apply to that supply if the vendor is registered, or required to be registered, at that point in time.

Find out more
Check the GST registration status of an entity ? abr.business.gov.auExternal Link
End of find out more
Vendors carrying on an enterprise with a turnover at or above the GST registration threshold will be required to be registered for GST. It is noted that certain supplies such as input taxed supplies are not included in the GST turnover calculations.

https://www.ato.gov.au/printfriendl...ct-and-tax-invoice---GST-questions/#Isthevend
I am not sure of this atm. I will ask my solicitor to confirm this with the vendor solicitor.
 
Hi ,

I rechecked the contract and here is what it mentions (Checked)

-The sale is not taxable supply because the sale is :
1)by a vendor who is neither registered nor required to be registered for GST
2)input taxed because the sale is of eligilible residential premise

So, I think it is pretty much clear now that GST is not applicable for this sale.
Isn't it ?
 
almostthere said:
Hi ,

I rechecked the contract and here is what it mentions (Checked)

-The sale is not taxable supply because the sale is :
1)by a vendor who is neither registered nor required to be registered for GST
2)input taxed because the sale is of eligilible residential premise

So, I think it is pretty much clear now that GST is not applicable for this sale.
Isn't it ?
Click to expand...

But there is still a special condition saying you will wear any GST?

If I was your lawyer I would explain the risks and let you make an informed decision. It may be very unlikely that GST doesn't apply, but no guarantee.
 
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