Vendor owes a bucketload of money to ATO

D

danwatto

Hi All,

I have a settlement on Wednesday.

However i just got a letter from the ATO saying that I must pay them up to $247,000 because I owe money to the vendor, and that I cannot pay the money to the vendor etc etc with all kind of warnings.

I have forwarded to my Solicitor that is doing the conveyancing but the office is closed.

Anyone seen this before, and what can I expect?

If the vendor had not notified us, is settlement delayed?
If I pay the ATO, who pays the Vendor's bank, who comes first ATO or bank? From the ATO letter it looks like I am not allowed to pay anyone but them...
 
I think this is a Section 218 notice. It is like a garnishee. I thought the letter would be sent to your solicitor. Look, I'm no solicitor but IMO the vendor is stuck between a rock and a hard place. The vendor has to honour the sales contract and in doing so must pay the ATO. I think the ATO knows how much is owing to the bank and there must be enough funds to keep everyone happy , except the vendor.
 
danwatto said:
Hi All,

I have a settlement on Wednesday.

However i just got a letter from the ATO saying that I must pay them up to $247,000 because I owe money to the vendor, and that I cannot pay the money to the vendor etc etc with all kind of warnings.

I have forwarded to my Solicitor that is doing the conveyancing but the office is closed.

Anyone seen this before, and what can I expect?

If the vendor had not notified us, is settlement delayed?
If I pay the ATO, who pays the Vendor's bank, who comes first ATO or bank? From the ATO letter it looks like I am not allowed to pay anyone but them...
Click to expand...

I have had these served on myself too. One for about $2mil on a $300k property. Nothing to worry about though, but it could cause difficulties at settlement.
 
wow this is interesting, so if there is any money at all on the property then settlement becomes impossible, and a creditor has prioritised themselves above a registered first mortgage
 
The way I see it, the vendor's bank won't settle without discharge of mortgage. ATO will then get zip and the poor vendor will lose their deposit.

Unless the vendor can quickly strike a deal with the tax office, I can't see anything hapening.

My opinion only!
 
There is one case from about 2 years ago where the ATO took priority over a secured creditor in a case like this.

From memory it was a simialr situation except there was some equity in the property. Settlement was held up and it went to the Supreme court where the parties agreed to let settlement proceed with the payment from the purchaser held in a solicitor trust account/or by the court.

Purchaser was then out of the picture and the ATO and the lender argued over the proceeds. ATO won because by this time the mortgage had been released so the mortgagee was no longer a mortgagee but an unsecured creditor. The bank's agreement to release the mortgage basically was a mistake which lead to loss of priority.
 
datto said:
The way I see it, the vendor's bank won't settle without discharge of mortgage. ATO will then get zip and the poor vendor will lose their deposit.

Unless the vendor can quickly strike a deal with the tax office, I can't see anything hapening.

My opinion only!
Click to expand...

Poor vendor - what about buyer.. I paid that deposit, and is being held in trust account.

I hope the ATO doesn't wipe it :eek:

My bank won't settle either, without clear title so they can take mortgage.

So I would think that ATO would take the leftover funds between the mortgage and the purchase price, after some settlement delay in determining this and agreeing to this. That would be the most sane thing to happen, what will actually happen though I do not know and will discuss with solicitor on Monday.

I hope it doesn't fall over, 3 prior to this fell over for other reasons :mad:
 
Terry_w said:
Purchaser was then out of the picture and the ATO and the lender argued over the proceeds. ATO won because by this time the mortgage had been released so the mortgagee was no longer a mortgagee but an unsecured creditor. The bank's agreement to release the mortgage basically was a mistake which lead to loss of priority.
Click to expand...

Thanks Terry, I'm not really clear on exactly what you're saying can you clarify:
* Previous bank discharged the mortgage, but they did not get funds because ATO took them since they became "unsecured"
* New bank took mortgage since property was now free
* Purchaser and new bank is OK
* Previous bank lost the money that was owed to them

Is that correct?
 
A secured creditor can take possession of the security ahead of unsecured. But by releasing the mortgage the secured creditor actually turned themselves into an unsecured creditor.

I can find the case if you want to read it.
 
danwatto said:
Poor vendor - what about buyer.. I paid that deposit, and is being held in trust account.

I hope the ATO doesn't wipe it :eek:

:mad:
Click to expand...

Sorry dan, didn't mean to put it that way.

That letter you received from the ATO would have a date in which it takes effect.

Your deposit would have been paid before that date. The way I see it, its not affected till its paid to the vendor. I don't know if agent's commissions have been paid out of that deposit but I'd be seeking a full refund of that deposit. again this is only my opinion and your solicitor will advise you of what to do.

Cheers
 
Thanks guys

Deposit is in the RE agent's trust account, so unless the agent does something stupid like pays it to the ATO.. should be ok.

Rather than refund, I want to see if we can get this to work..

Thanks Terry I might have a read later on.
 
I wouldnt be concerned provided you abide by the Commr notice. Legal advice is needed to esnure this is compliant. Get it wrong can leave a nasty sting. Its normal... The ATO will require the vendors lawyers to account for the ATO in the settlement. The ATO arent trying to stop the sale....They just want to take security over the proceeds and likely require that the funds be treated as "controlled monies" meaning that they have authority over its release..

Dont panic. Very typical. The ATO actually want to sale to proceed as it gives them a payment.

One thing to watch ..... Double check GST compliance and keep the tax invoice. It will be checked !! Its an automatic audit for GST in my experience. If you comply there will be no issues.
 
You must log in or register to reply here.

Similar threads

keroppi_gims
Vendor not providing vacant possession at settlement
2
Replies
20
Views
10K
keroppi_gims
keroppi_gims
bentrails
Conveyancer does not have a trust account
Replies
10
Views
3K
T.G
T
C
Gifting money into family trust
Replies
15
Views
12K
Terry_w
Terry_w
M
What happens if vendor makes a mistake on the amount to be paid on day of settlement?
Replies
13
Views
2K
miss green eyes
M
G
Vendor wants to rent back
2
Replies
22
Views
3K
gach2
G
Back
Top