Why is it important to review the contract particulars?
The contract particulars contain important details specific to your agreement. These can be found on pages 1 and 3 of the ‘Contract for the sale and purchase of land 2022 edition’ by The Law Society of New South Wales and The Real Estate Institute of New South Wales. This is the contract form used predominantly in property sale and purchase transactions in NSW.
It's important to review the contract particulars carefully to ensure all information is correct and if you notice any inaccuracies, inform relevant parties as soon as possible.
- Purchaser Details
- Vendor Details
- Vendor’s Agent Details
- Settlement Date (Date for Completion)
- Property Details, such as:-
- Address
- Lot and plan number
- Plan type
- Vacant possession or subject to existing tenancies
- Improvements
- Inclusions
- Exclusions
- Purchase Price, Deposit and Balance Purchase Price
If more than one Purchaser — joint tenants or tenants in common;
- If tenants in common in unequal shares — the specific shares for each Purchaser;
- GST application
Why should I check the purchaser names listed on the contract?
It is crucial to have the correct names on the contract as it ensures legal accuracy and avoids any potential issues or disputes in the future. Incorrect or incomplete names can lead to complications, such as delays in the processing of the contract, problems with financing, or even legal challenges regarding the ownership of the property. Therefore, taking the time to carefully review and confirm that all names are correctly and fully listed is a vital step in the contract process.
Additionally, this verification helps in maintaining clear and precise records, which is essential for both the Purchaser and the Vendor. Accurate names on the contract can also prevent any misunderstandings or miscommunications between the parties involved. If you find any discrepancies or if any names are misspelled, promptly communicating this to the Vendor or their real estate agent will help in making the necessary corrections in a timely manner.
Ensuring that all names (including any middle names) are fully listed and correctly spelled on the contract is a fundamental aspect of the property transaction process. By doing so, you contribute to a smoother and more efficient transaction, minimising the risk of errors and ensuring that all parties are accurately represented in the agreement.
Why should I check the real estate agent’s names listed on the contract?
It is common for contracts in NSW to require that you acknowledge you were introduced to the property only by the Vendor’s agent noted on the front page of the contract.
If you breach this acknowledgement, you may be required to pay another agent's commission and any legal costs and losses incurred by the Vendor.
If you were not introduced to the property by the agent listed on the contract, ensure you let your legal representative know.
Why is it important to understand the GST application to the transaction?
It is crucial to understand the total amount you will need to pay at settlement, including whether or not you may need to account for Goods and Service Tax (‘GST’) that may be payable in addition to the purchase price. Under the standard NSW contract, the purchase price noted on the contract front page is inclusive of GST unless otherwise specified.
This is essential for financial planning to ensure a smooth and successful property transaction. Make sure to clarify any uncertainties with your financial advisors and legal representative to avoid any unexpected financial burdens at settlement. This due diligence will help ensure that you are fully prepared for the financial commitments involved in purchasing the property.
If GST is applicable to the purchase, you can also seek advice from a tax professional if you can claim a GST credit.
What do I need to know about GST Residential Withholding and Foreign Resident Capital Gains Withholding obligations when purchasing property?
As Purchaser, you may be required to withhold and pay part of the purchase price directly to the Australian Taxation Office (‘ATO’) at settlement. Failure to fulfil your withholding obligations can lead you having to pay interest and penalties in additional to the withholding amount/s from your own pocket.
GST Residential Withholding
If you are purchasing a new residential property or potential residential land (vacant land that can be used for residential purposes), you are generally required to withholding and pay part of the purchase price to ATO. The withholding amount is usually 1/11th or 7% (if the margin scheme applies) of the purchase price inclusive of GST.
The Vendor’s legal representative must indicate in the contract whether withholding is required and if so, the Vendor must provide you with a supplier’s notification which sets out the withholding amount and details of the supplier.
Foreign Resident Capital Gains Withholding
If you purchase a property valued at $750,000 or more, you must withhold and pay 12.5% of the value to the ATO unless each Vendor produces one of the following prior to settlement:
- a valid ATO clearance certificate; or
- a valid ATO variation reducing the withholding amount.
This requirement is designed to assists the collection of Australian tax liabilities from foreign resident Vendors.
What are the key dates I need to be aware of in a property contract?
Reviewing and adhering to these key dates is crucial for the successful execution of the contract. Missing any of these deadlines can result in penalties or termination of the contract, so it is important to stay organised and proactive throughout the process.
In a standard purchase transaction of an established property (not off the plan), you should note the following dates:
- Contract Date: This is the date the contract becomes legally binding. In New South Wales, contracts are ordinarily signed in counterparts, one by the vendor and one by the purchaser. The contract date is the date the signed counterparts are ‘exchanged’ (or swapped).
- Deposit Due: The deposit must be paid to the Deposit holder by contracts exchange, unless the contract specifies another time as agreed by the parties. If a cooling off period applies, the Vendor generally accepts the deposit to be paid as follows:
- 0.25% of the purchase price by contracts exchange; and
- the balance by the expiry of the cooling off period.
- Settlement Date: This is the date the parties must complete the transaction. On this day, you pay the balance of the purchase price, and the property ownership is transferred from the Vendor to you.
