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In Check Issue 79 | June 201828 June, 2018
New requirements for some purchasers to withhold GST – 1 July 2018
From 1 July 2018 purchasers of certain new residential premises and potential residential land will be required to withhold the goods and services tax (GST) and pay it to the Australian Tax Office (ATO). Vendors of residential premises or potential residential land must give the purchaser written notice about the withholding requirements before making a supply (usually before settlement) by sale or long-term lease. This notification applies to a wider range of property than the withholding obligations.
Penalties apply for both vendor and purchaser if they fail to comply and practitioners will be at risk of claims if they fail to advise clients about their new notification and withholding obligations and fail to take steps to ensure compliance.
These are new requirements that every conveyancing practitioner needs to be across. For further information see LPLC’s bulletin here
We continue to receive regular claims and notifications involving fake emails and fake bank account details. Always verify bank account details sent by email by speaking to the person before paying any money. Use a phone number you know to be correct and do not reply to the email as it may have been sent by a fraudster. Even emails from other law firms with their trust account details need to be verified by speaking to the firm.
In a recent notification a property was sold by private sale and the secretary for the vendor’s practitioner sent the details of the firm’s trust account to the purchaser’s practitioner so the deposit could be paid. At 10pm the same day a further email was sent purporting to be from the vendor’s practitioner advising that there had been ‘a little error in the bank details sent earlier’ and setting out ‘the corrected details of our trust account’. The deposit was transferred to the new bank account which turned out to be the fraudster’s account. The mistake was quickly discovered, the bank account was frozen and the money was recovered.
Restrictive covenants in memorandum of common provisions
New requirements for creating restrictive covenants in transfers of land and plans come into effect on 1 July 2018. Contracts signed on or after 1 July 2018 where a restrictive covenant is created in the transfer must have the covenant in a memorandum of common provisions recorded under the Transfer of Land Act 1958 (MCP) and the reference to the MCP recorded on the transfer. The same applies to creation of restrictions in a plan. Specific wording on the transfer and plan must be used and is set out in the Land Use Victoria Customer Information Bulletin 175. How to complete section eight – covenants in the transfer of land (former T1) form is set out in Land Use Victoria Customer Information Bulletin 177.
From 1 March 2018 stand-alone transfers of land must be done on PEXA. Examples of these types of transfers include transfer between family members where there is no mortgage involved, trustee to trustee transfer or a survivorship application that is lodged with just a transfer.
Land Registry has rejected paper transfers that practitioners have tried to lodge over the counter since 1 March. When the practitioner has then tried to lodge the transfer on PEXA Duties Online has not recognised that duty has already been paid and it has to be paid again. A refund can be applied for but that takes some time. Don’t leave yourself or your client in a position of having to find a second amount of duty.
The Law Library of Victoria manages a valuable resource for the whole Victorian legal profession. Headquartered in the Supreme Court Library, it provides high quality digital and print library resources and materials.
The Law Library Online will be available to barristers from 1 July and will be accessible 24 hours a day, seven days a week via the computers in the Richard Griffith Library (Owen Dixon East, Level 1).
From 1 July, the Court forms, precedents and pleadings, Victoria online service will be available via the computers in the Supreme Court Library for solicitors and barristers to access and download. Other key resources that are available include:
• Civil Procedure Victoria
• The Laws of Australia
• Criminal Law Victoria
• Robson’s Annotated Corporations Legislation
To keep up to date with what is happening in the library you can:
• subscribe to their fortnightly bulletin for case and legislative updates and more
• visit the website www.lawlibrary.vic.gov.au
Our website has many GST FAQs you should check when you have a GST issue before you use our GST hotline enquiry service as the answers to many of the enquiries can be found in the FAQs. You should also use our GST checklist to assist you in analysising your question.
The recent GST queries suggest that some practitioners are not understanding the test for whether a client is required to be registered for GST. Below is a typical question and answer.
Q: My client is not registered for GST and he is selling a commercial property/factory for around $400,000. Do I need to deal with GST in the contract?
A: While your vendor client is not registered for GST the question you need to ask is whether he is required to be registered. The points to note are:
• an entity is required to be registered if its GST turnover from an enterprise is at or above the GST registration threshold ($75,000 p.a.)
• GST turnover consists of current GST turnover and projected GST turnover and includes turnover from all sources other than salaries and input taxed turnover
• it is not a requirement that the enterprise be one relating to dealings in land
• whether an entity is required to be registered is not judged on a property by property basis.
In your case, the GST turnover is not restricted to the turnover from the business that your client operates. It will certainly include that turnover, but will also include relevant turnover from other sources.
If the position is that your client is neither registered nor required to be registered for GST, section188-25 of the GST Act excludes the proceeds of sale of a capital asset from projected GST turnover, so avoiding the situation where the sale itself triggers a requirement to be registered. This exclusion does not apply where land is trading stock, and land may become trading stock (for income tax and GST purposes) if acquired for the purpose of resale.
If there is any likelihood at all that your client is required to be registered, the contract should be ‘plus GST’ and you should determine his GST status one way or another and, if the indication is in favour of registration, register him.
If the property is leased, you should consider if the going concern exemption will apply.
If the property is not leased you should conside whether the margin scheme could be applied.
Key Risk Checklists
Key Risk Checklist: GST – revised
Practice Risk Guides
Law Institute Journal articles
Conveyancing claims on the rise (April 2018)
Post mortem risk management (May 2018)
Take a step back (June 2018)
Risk video bites
Three new risk video bites were released.
Drafting (April 2018)
Family law financial agreements (May 2018)
Personal costs orders (June 2018)
A new risk video bite is posted on our website, LinkedIn, Twitter and Facebook on the first Friday of every month and emailed to everyone who receives In Check. The email will replace the Friday blog email.
LPLC’s 2018 Calendar of events is published on our website to help you plan your CPD year.
This year it will be held in a new venue – Zinc at Federation Square, Corner of Flinders and Swanston Street, Melbourne VIC 3000.
The six CPD unit full-day seminar covers dilemmas, pitfalls and hazards practitioners encounter and how to avoid them. Register and view full program here.
The same program is run over three days, Tuesday 24 July, Wednesday 1 August and Thursday 9 August.
Full day $264.00 including GST or Half day $132.00 including GST
Choose either AM session or PM session, or split attendance over two different dates.
If you change your email address don’t forget to tell us so you will continue to receive our newsletters, emergency bulletins, seminar launches and blogs.