Property article – Axegal

Increased FIRB Application fees to increase affordable housing supply

admin — Wed, 27 Dec 2023 07:16:27 +0000

Contents

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Summary

On 10 December 2023, the Federal Government announced its intention to increase 3 times the current FIRB application fees (Foreign Investment Review Board) to purchase established dwellings and increase vacancy fees 2 times for foreign-owned properties.
The current FIRB application fees for vacant land and new residential dwellings remain unchanged.
This proposed increase of FIRB application fees is very significant, given the Federal Government only doubled FIRB application fees on 29 July 2022 (https://foreigninvestment.gov.au/sites/firb.gov.au/files/2022-07/G10_Fees_210722.pdf).

Proposed 3x FIRB application fees for established dwellings

If you are a foreigner and you want to purchase residential property in Australia, you must obtain FIRB approval. Whether you are permitted to purchase an established dwelling depends on the type of visa that you hold. For example: if you are on a student visa (sub-class 500), you are permitted to purchase one established dwelling to live as your main principal place of residence, whereas if you are on a tourist visa you are not permitted to purchase such property.
The FIRB application fee depends on the purchase price, the higher the price the higher the fee and it goes in $1M bracket. If you purchase up to $1,000,000, the current fee is $14,100; for purchase price of up to $2,000,000, the fee is $28,100.
Now the Federal Government wants to increase FIRB application fees for the purchase of established dwellings by 3 times, that is, if the purchase price is up to $1,000,000, the proposed application fee is $42,300.
The Federal Government has not yet stated whether the proposed increase would also apply for property developers who purchase established dwellings to redevelop into new housing.

Proposed 2x vacancy fees

If you are a foreigner and you own a property in Australia, you are required to lodge vacancy fee return every year. If your property is not occupied or not genuinely available for return, for at least 183 days in a 12-month period, you could be liable to pay an annual ‘vacancy fee’.
The vacancy fee is generally equal to the FIRB application fee that you paid.
The Federal Government wants to increase by 2 times the annual vacancy fee. The intention is to encourage foreign investors to make their unoccupied residential properties available to renters.

Disclaimer: This article is to provide general information. You should not rely as legal advice. Formal legal advice should be sought for your own circumstances.

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Thinking of buying a residential property?

admin — Sun, 10 Dec 2023 05:44:26 +0000

Before buying a property, we recommend that you should obtain a Building & Pest Inspection Report for a House while a Strata Inspection Report for a Unit / Apartment.

Building & Pest Inspection Report
- You will see comments and recommendation about places that require replacement/ ratification.
- You will also see comments about the potential risks of pest infected areas of the building.
Strata Inspection Report
- You will read the Annual Meeting Report of the Owners Corporation and see if there were any issues about the building.
- A surplus in Administrative Work Funds and Capital Work Funds is a good sign.
- You will also see the budget forecast for strata levies so that you have a better idea of how much strata levies you are going to pay in future years.

Before signing a Contract You should have already had loan pre-approval from Banks or Mortgage Brokers. Besides, you should have prepared enough savings for stamp duty, disbursements and adjustments. Alternatively, you can purchase the property using cash.

Fees that you might need to consider:
1. Legal Fee
2. Stamp Duty
3. Disbursements usually include the following:

Property Searches Fee;
Title Registration Fee;
Settlement Fee;
Agency Fee.

4. Adjustments: On the day of settlement, the following fees will be adjusted proportionally and added onto the balance of purchase price of the property:

Water Rates;
Council Rate;
Strata Levies;
Land Tax;
Others.

Contract Exchange If the purchase price is agreed, the Selling Agent will provide a Sales Advice to the Vendor’s lawyer. Both parties’ lawyers negotiate and make changes to the Contract. Buyer signs the Contract and pays full 10% deposit. The Contract is then delivered to Vendor’s lawyer. Contract only becomes legally binding after the Vendor also signs and send it back to the Buyer’s lawyer.

Stamp Duty You need to make stamp duty payment to the responsible State Revenue department before a certain deadline (Generally within 3 months from the date of Contract Exchange). This payment can be made by either Bpay or paid into Lawyer’s trust account. Settlement and completion Most of the settlements are now complete through an online workspace – PEXA. The settlement process is more flexible and convenient than that in the past when settlements were complete by paper and bank cheques.

If settle by Finance, the Mortgage Bank representative will link the loan funds available to PEXA. You need to make sure that there are enough funds in your shortfall account for completing the settlement. You will be notified once the settlement is complete.

Title Document Registered On the day of settlement, the title of the property will also be transferred to your name. The Certificate of Title will be kept by your Mortgage Bank if you are buying the property using bank loan. Otherwise, the Certificate of Title will be posted to your lawyer’s office for your collection.

Disclaimer: This publication is intended to provide commentary and general information. It should not be relied upon as legal advice. You should seek formal legal advice in particular transactions or on matters of interest arising from this publication.

What is “Off-the-plan” Contract?

admin — Sun, 10 Dec 2023 04:44:46 +0000

You buy or about to buy a residential property that is yet have property title registered and/or the construction is yet commenced or completed. You must be very excited with buying a brand new home! However, buying off-the-plan always carries more risks than buying established properties.

It is important that you consider and understand the risks associated with the process of purchasing an off the plan property. In this article, Axegal draws your attention to three most notable factors (and thus risks) you need to consider carefully before you sign an off the plan contract.

1. Sunset Date

Off the plan contracts always have a sunset date (‘Sunset Date’).

The seller is required to fulfill its contractual obligations, including (among many other processes) registering of the residential lot and obtaining the occupation certificate. If the seller fails to do so by the Sunset Date, the purchaser and the seller are entitled to rescind the contract.

Unexpected events like covid-19 restrictions, work strikes or even bad weather may delay completion of those processes.

That is why off the plan contracts always include a clause to extend the Sunset Date in case those unexpected events happen, and shift all the risk of the extended Sunset Date to the purchasers.

The recission of contract does not come automatically after the sunset date passes. The seller may only rescind by notifying and obtaining written consent from the other party, at least 28 days before the proposed rescission, or an order from the Supreme Court.

2. Material change to the draft Strata Plan

On settlement, there may be changes to the draft plans.

Unless the change is material, the purchaser cannot make any objection to the change or claim for compensation. An example of a material change is when the area of the property is reduced by or more than 5% compared to the area of the property shown in the draft plan. If this is the case, the purchaser is entitled to rescind the contract, or choose to proceed with the contract and claim for compensation.

Most of contracts are drafted to allow sellers to make changes without notifying purchasers if the change is not a ‘material particular’.

3. Variations to the Schedule of Finishes

The proposed schedule of finishes, which is a list of product specification and materials that may be installed in your future home, must be attached to the contract. Changes to schedule of finishes often occur during construction, and the final inclusions maybe different from what the seller originally promised you.

Almost all the off the plan contracts will have special conditions which allow the seller to vary the schedule of finishes. It is essential to have your solicitors review these conditions and make sure that the contract has them covered. And remember, make sure that if the seller changes the finishes, the new ones must be of equal or better quality than the ones on the list!

Other risks may include construction defects or unfair adjustments on settlement. Off the plan contracts are substantially more complex than standard contracts for established properties. If you are thinking of paying a holding deposit or signing a contract for an off the plan property, contact Axegal before you do so, and we will help you get through the entire process smoothly.

We take pride in our own work and are always grateful for the trust of our clients.

Noticeable Changes In NSW Stamp Duty Schemes 2023

admin — Sat, 09 Dec 2023 07:23:37 +0000

NSW Stamp Duty Schemes

First Home Buyer Choice Program

The First Home Buyer Choice Program has been closed to new applications on 1 July 2023. This means that paying stamp duty annually is no longer an option.

First Home Buyer Assistance Scheme

On the other hand, the NSW Government has increased the thresholds for First Home Buyer Assistance Scheme (FHBAS) for eligible first home buyers.

	Property Value	Exemption
New & Existing Homes	Value is equal to or less than $800,000	Exempt You can apply for a full exemption from transfer duty.
New & Existing Homes	Value is above $800,000 and less than $1 Million	Concessional rate You can apply for a concessional transfer duty rate.
Vacant Land	Value is equal to or less than $350,000	Exempt You can apply for a full exemption from transfer duty.
Vacant Land	Value is above $350,000 and less than $450,000	Concessional rate You can apply for a concessional transfer duty rate.

Table 1: FHBAS Thresholds (Reference: NSW Revenue)

Impacts of the NSW Stamp Duty Reform on First Home Buyers

The changes in new scheme means that there will be a greater number of first home buyers who can access and benefit from the scheme.
The increase in thresholds under the new stamp duty scheme will benefit eligible first home purchasers in paying no tax or paying tax at a significantly lower amount.

For example, an eligible first home buyer may save up to $31,090 when purchase a property at $800,000 under such new changes (NSW Revenue – New FHBAS).

The new scheme also extends the requirement to live in the home from 6 months to 12 continuous months. This change intends to improve the integrity of first home buyers when undertaking the scheme.

Eligibility (NSW Revenue – Eligibility)

To apply for FHBAS, the purchaser must be determined to be eligible for the scheme.

Below are some of the criteria to determine eligible first home buyers:

The purchase must be for a new or existing home, or vacant land in NSW.
The property value must be within the threshold amounts.
You must be an individual, (not a company or trust).
You must be over 18.
For new or existing homes, you must meet the requirement for living in the property (see above).

Disclaimer: This publication is intended to provide commentary and general information. This publication should not be relied upon as legal advice. You should seek formal legal advice on matters of interest arising from this publication such as applying for the program which may require information relating to the exchanged contracts, lodging applicable forms, and proof of identity by the Solicitors.