BALDWINS • FoodLegal

Australian Lawyers and Consultants

Special Conditions in Property Contracts

December 2001

Our Baldwins property law section, headed by LIV Accredited Property Law Specialist Anita Rumba, handles leasing and sub-division transactions for landlords and vendors and undertakes due diligence investigations for purchasers. Property owners and prospective purchasers need to be certain of the GST consequences of their proposed transaction:

Example No. 1:

A purchaser (of a residential property) who was not registered for GST purposes might be able to convince a vendor to insert a special condition that allows the “GST margin scheme” to apply. The vendor may be agreeable if the vendor acquired the property either through the margin scheme or as a GST-free supply or as an input-taxed supply. The effect of enabling our purchaser to pay GST under the “GST margin scheme” is that less GST is payable, thereby not only reducing the total price but also reducing stamp duty payable.

Example No. 2:

The vendor of a vacant commercial property might be asked by the purchaser to make a sale a “GST-free” transaction (in accordance with the procedure under the Act) on the basis that the property was a “supply of a going concern” albeit that it was presently vacant. We might recommend that the vendor not agree and we could request the insertion of a “GST-recoupment” special condition to add GST to the sale price. Without such a special condition, the ATO might compel the vendor to account for one-eleventh of the sale price as the unpaid GST because the ATO might adopt a less tax neutral interpretation than the purchaser’s.

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

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