Trying to get useful information from the internet is about as easy as getting a glass of water from a fire hydrant! If you haven’t heard that expression before, you have now. I heard that at a law conference last year.
I also heard a discussion on the radio about the ever-increasing need for professional advice due to the avalanche of information which people will be unable to properly decipher and use.
Why write about this?
I’ve just read an article published by a reputable national company involved with the real estate industry – not a real estate agency.
The topic was transfer duty (or stamp duty) – and it contained significant factual errors.
It’s a concern because when information is shared by a well-known brand in the industry, it’s likely that most of their readers will rely on it and develop their plans based on the information.
Many smaller organisations may re-publish or share the information with their own readers – further adding to the spread of mis-information.
The Question?
Whatever question you ask on an internet search engine, you will usually receive thousands of answers. And it’s possible that at least one of these answers will be correct. But which one? Is it the first answer? Is the answer at least on the first page?
But have you even asked the right question for your situation?
A common response from a lawyer to an initial question will be: “It depends”! The initial question won’t contain all of the relevant information necessary to provide the complete answer that you need to make the best decision for your circumstances.
The fact-challenged article
Although the article was brief – there were several errors which could cause cash-flow issues for anyone relying on the information.
I presume most readers will believe what they read in that article, and that’s a worry! The article seeks to cover all of Australia, which is a big ask. Too much of an ask as it turns out!
The first error is contained in the second sentence. The fifth sentence contains a partial inaccuracy – the statement was correct for some property buyers, and incorrect for others.
The seventh sentence contains another significant error. The rest of the article gave some specific examples relating to specific Australian states.
This lack of accurate information is another reminder for you to arrange a meeting with your lawyer before signing your next purchase Contract.
What should you discuss with your lawyer?
The answer to this question depends upon you, and what you are buying.
Before signing any document provided by the Sales Agent, arrange for a draft Contract to be sent to your lawyer. Then schedule a discussion with your lawyer and explain your circumstances.
Some of the issues which may be worth discussing are:
- Do you need to sell an existing property before you can buy this property?
- Do you need to borrow money to complete the purchase of this property?
- If you have an existing mortgage over another property – and you want to use the equity in that property to partly finance this new purchase, are there benefits in using a different lender for this new property?
- If you intend to change the property (such as building an extension), do you need a special condition in the contract allowing you to conduct due diligence enquiries?
- What investigations in the form of searches do you want to obtain?
- How much Transfer Duty is payable, and when is it payable?
- Is the Buyer a foreign person or someone who lives outside Australia most of the time, where higher transfer duty or land tax might be payable?
- And perhaps one of the most important questions: in what name/s should you buy the property?
There are of course, many more possibilities. This is a good start.
Choosing the “right” Buyer?
You may choose to buy in the name of one person, or 2 or more people, or a company that you control, or a trust that you control, or your Self-Managed Superannuation Fund. How do you choose?
Transfer Duty
- Will the choice of buyer affect their transfer duty obligations on a previous purchase?
- If 2 or more buyers where this is the first purchase for one buyer, do you want that buyer to be the sole buyer & therefore claim the full concessional rate of transfer duty?
Income Tax
- If buying as an investment, will the choice of buyer result in higher income tax being payable, or reduced tax concessions where using a negative gearing strategy?
Capital Gains Tax
- Will the choice of buyer affect their capital gains tax obligations on a previous purchase?
- If buying an investment or holiday home, will the choice of buyer impact future potential capital gains tax liability?
Land Tax
- If buying an investment or holiday home, do any buyers own other properties which will be included in land tax liability assessments?
Asset Protection
- Are any of the buyers involved in professions or businesses where there is a risk of being involved in litigation, or disputes with former spouses, or other financial risks?
Once the decision is made
Whatever choice is made, review your Will and your estate planning arrangements to ensure that all contingencies are covered and your beneficiaries are happy (apart from your sad passing of course)!
Alternatively, ignore your legal and financial affairs and leave it to your Executor (Or Legal Personal Representative) to arrange for a Supreme Court judge to decide – at huge expense to your family. I know someone who would be delighted to assist with that process.
Disclaimer: The above is to be considered as general education. This is not advice and it is not to be acted upon without advice from a qualified professional who understands your personal circumstances.
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