On-selling development block before settlement

[padraig]

I have an opportunity to buy a development block from an investor who has not yet settled. He has signed a contract and is due to settle end of November. He is looking at on-selling for a $30,000-$40,000 profit. It is still a good deal if I pay the extra amount. My question relates to stamp duty payment. Can he on-sell to me without paying stamp duty, or does he need to settle (and pay stamp duty) and then sell to me (with me also paying stamp duty)?. The offer is in his name only (does not include and/or nominee). If he can avoid stamp duty, he will accept a lower offer from me.

Any help appreciated

Regards

Padraig

 

[paulzag]

Hi Padraig

You must specify the state for questions like this. In NSW, Vic and Qld Stamp duty is payable on both transactions. In NSW he could get asked to pay stamp duty on you purchase price not his. Stamp Duty is ad valorum - at value, so the price on the contract is irrelevant.

In Vic OTP purchasors can pay less SD because early OTP purchases are valued on Land.

And/or nominee in Qld, Vic and NSW does not allow them to flip the property to an unrelated purchaser.

There is a theoretical way for a flipper to buy a property and only one lot of stamp duty be paid. But it is tricky, structured and theoretical at this point in time.

Paul Zag
Dreamspinner

 

[padraig]

Thanks Paul,

I am in WA. I guess one option is for the investor to cancel the existing contract and introduce me to the vendor as an alternative buyer (with no change to settlement date). Would need side agreement between me and investor: Lots of trust needed!

regards

Padraig

 

[Michael Yardney]

One thing to consider is why pay more than he did.
If he found a bargain, so could you if you do your homework.
Even if it take a few months to find the right ptoperty that $30,000 could be your and not in the pocket of the guy from whom you are buying the property.