|Five things you need to know about the Contract for the Sale and Purchase of Land 2016 |
By Gabrielle Lea, Policy Lawyer, Law Society of NSW
Released on 30 May via the Law Society's ECOS portal, there are some substantial changes that have occurred since the 2005 and 2014 editions. Here is our summary of the top five things you as a solicitor need to know:
1. The Commonwealth's foreign resident capital gains withholding payment measure
The 2016 edition of the contract has been released to address the Commonwealth's foreign resident capital gains withholding payment measure, which begins on 1 July 2016. Under this measure, where the sale price for a contract is $2 million or more, a purchaser must withhold 10% of the price and remit to the Australian Taxation Office (ATO) on settlement, unless a clearance certificate (which confirms the vendor is not a foreign resident) is provided to the purchaser before settlement. This means that Australian residents selling properties for $2 million or more will need to obtain a clearance certificate, otherwise the withholding will apply. See the ATO website for further information regarding the measure.
2. Clearance certificate, variation and purchaser payment notification form
The new edition incorporates the mechanics of the foreign resident capital gains withholding payment measure, including:
The vendor must obtain a clearance certificate from the ATO website confirming it is not a foreign resident for the purposes of the measure. Where there is more than one vendor a clearance certificate must be provided for each vendor. Ideally, the clearance certificate should be attached to the contract, though it can be provided anytime before settlement.
The vendor may apply to the ATO to reduce the amount of the withholding payment from 10% to a lower amount, even nil. If the vendor provides the variation to the purchaser, it is this lower amount that is then withheld at settlement.
Purchaser payment notification form
The purchaser must register with the ATO prior to settlement, advising the details and amount of the withholding payment.
These three forms will be made available at the ATO website.
3. Swimming pool barriers
Recent changes to vendor disclosure for the sale of properties with swimming pools are reflected in the 2016 edition. The list of documents has been expanded to include the certificate of non-compliance and detailed reasons for non-compliance. The definition of “work order” has also been revised to expressly exclude notices under section 22E of the Swimming Pools Act 1992 or clause 18B of the Swimming Pools Regulation 2008. This change has been made for consistency with the intended operation of a certificate of non-compliance - the purchaser doing the necessary work to make the pool barrier compliant within 90 days of settlement.
4. Land tax
Minor amendments have been made in the 2016 edition for expected changes to the operation of land tax certificates, likely to begin on 1 July 2016. Due to the Commonwealth's third party data reporting measure, the Office of State Revenue is changing the way the land tax mechanism will operate. The vendor (not the purchaser) will usually obtain a land tax certificate and serve it on the purchaser. Clause 16.6 has been amended so that whether the land tax certificate is obtained by the purchaser or the vendor, the vendor must give the purchaser a clear land tax certificate on completion. For further information, see the Taxation Administration Amendment (Collection and Disclosure of Information Commonwealth) Bill 2016.
5. Electronic only
Like the 2014 edition, the 2016 edition will be available only in electronic format. It can be purchased through the Law Society's ECOS portal as well as through a number of other bodies that have a licence to sell the 2016 edition.
The 2005 and 2014 editions of the contract will no longer be sold after 30 June 2016. Unless you have your own special condition to deal with the foreign resident capital gains withholding payment measure, the 2005 and 2014 editions should not be used for contracts that may be exchanged on or after 1 July 2016 where the sale price might reach $2 million.
Contract for the sale and purchase of land 2016 edition – 15 June