Using a Company instead of an Option???

Anonymous · 25th Nov, 2001

From: Anonymous

If you were to put down a deposit for a $400,000 ‘off-the-plan’ property under a company name, with a 2 year settlement/construction period, and then decide to sell for $480,000 once the building is complete (ie- after the 2 years) – normally you’d have to settle the property, pay $13,500 in stamp duty and then sell it to the new buyer (who would then also pay stamp duty on the new sale price of $480,000).

Rather than do this, would it be possible to sell the company to the new buyer before settlement, by making the buyer the new director of the company? The buyer would then pay you $80,000 (which is actually your profit from the property) and be responsible for the company settling on the property. This would save you $13,500 in stamp duty because you’re not actually settling it yourself, and the new buyer would only pay stamp duty on the purchase price of $400,000 - not $480,000!

Can anyone tell me if they can see this scenario working, or is there something I am missing? How would the $80,000 profit be taxed - would it be classed as proceeds from the sale of the company or something else?

Boyler_Room · 25th Nov, 2001

Reply: 1
From: Boyler Room

This is a minor detail. You would be held responsible, since your signature is on the paperwork. Therefore, if anything were to go wrong, regardless of whether u are still involved with the transaction or not, it is on your head.

It's a special condition referred to as a director's personal guarantee.

I quote:
"The signatory(ies) for the purchaser is/are personally liable for the due performance of the purchaser's obligations as if the signatory(ies) is/are the purchaser. The purchaser and every signatory must procure the execution by all company directors of a guarantee to be prepared and served by the vendor at the expense of the purchaser and each signatory. The executed and stamped guarantee must be returned to the vendor within 14 days of service."

Basically, what I am saying is that even though they may be the new director/owner of the company that is purchasing the property, since your name is on the contract you are ultimately responsible for the deal going smoothly.

Boyler Room

Naturally, these are my ramblings and not to be taken as legal advice. Please seek your own legal advice.

JoannaK · 26th Nov, 2001

Reply: 1.1
From: Joanna K

This is a multi-part message in MIME format.

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Hello,

Wouldn't you be able to put on the contract when you first buy it XYZ =Company or it's Nominees??

Then any one would be able to settle on the purchase when the time =comes?

I've done this before, but with development sites, not units.

Kind regards

Joanna Karavasilis
Principal
THE RENTAL SPECIALISTS

PH: 02 9599 3363
FAX: 02 9599 3447
EMAIL: rentals@rentalspecialists
WEB: www.rentalspecialists.com.au

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charset="iso-8859-1"
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<!DOCTYPE HTML PUBLIC "-//W3C//DTD HTML 4.0 Transitional//EN">

Hello,

Wouldn't you be able to put on the =contract when
you first buy it XYZ Company or it's Nominees??

Then any one would be able to settle on =the
purchase when the time comes?

I've done this before, but with =development sites,
not units.

Kind regards

Joanna Karavasilis
Principal
THE RENTAL SPECIALISTS

PH: 02 9599 3363
FAX: 02 9599 3447
EMAIL: rentals@rentalspecialists</=FONT>
<FONT face=Arial size=2>WEB: www.rentalspecialists.com.au=

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Using a Company instead of an Option???

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