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Copyright © Baldwins
1998-2006

Property News Bits

September 2001 -- revised January 2003

  1. GST AND “NEW” REAL PROPERTY

    Although most people know that a sale of new residential premises attracts GST, many people would not be aware that, in some cases, so-called “old” premises may also be considered “new” – according to a recent GST Draft Ruling GSTR 2001/D4 (previously 2001/D3) but retrospective in effect to 1 July 2000.

    In order to determine whether premises are “new”, the Australian Tax Office (“ATO”) considers the following issues:

    1. Has the property never been sold or leased as residential premises?
    2. Has the property been built to replace demolished premises?
    3. Has the property been “substantially renovated”?

    If the answer to any of the above questions is yes, the ATO may deem the premises to be “new”, and therefore subject to GST. With few exceptions, purchasers of new residential premises are required to pay GST on the purchase price, and need to take this extra expenditure into account when negotiating the price with the vendor.

  2. ENFORCING A PROPERTY CLAIM : CONSTRUCTIVE TRUSTS, NUPTIAL AGREEMENTS AND OTHER REMEDIES

    Sometimes a constructive trust may come about where a son works on his family’s farm for limited wages in the expectation that his parents will leave the farm to him upon their death. In at least one court case, it was held that the parents were considered to hold the farm on trust for their son for a part-share, even though the son was not registered on title as an owner. Accordingly, on sale, part of the proceeds were to be awarded to the son.

    Likewise, where the de facto partner of a house-owner contributes to mortgage payments and improvements to the house, the house-owner may possibly be required to hold the house on trust for both of them. Similarly, a constructive case might even arise if a wife helps to build up a business which is owned by her husband or an entity controlled by him.

    Accordingly, it is important that individuals are very clear about their expectations in relation to property in order to protect themselves in the event of a dispute. This may be particularly important for parties entering second (or subsequent) marriages, who often have substantial assets that they wish to protect for the benefit of children by a former marriage.

    Nuptial agreements may also be useful to formalise agreements about property rights between parties before, after or even during a marriage. It need not wait for the Will! An agreement may deal with property, financial resources and/or maintenance for the children or spouse. This type of agreement can now be enforced by the Family Court if it is in writing and signed by parties who have received legal advice to be evidenced in a manner prescribed by recent legislative amendments.

For further information, contact Joe Lederman at BALDWINS, Australian Lawyers & Consultants.

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