Emma-Lee Jones

In February of this year, Revenue NSW announced a scaling back of the application of surcharge purchase duty and surcharge land tax for citizens (and certain affiliated entities) of New Zealand, Finland, Germany, and South Africa.  We commented on those changes here: Tax treaties and the scaling back of surcharge land tax and surcharge purchaser duty - McCabes   Surcharge Regime By way of background, the surcharge purchaser duty and surcharge land tax have applied to certain acquisitions of residential property in New South Wales since 2016. In summary, the current regime for acquisitions of residential property by foreign persons results: in the application of a surcharge duty (since 1 July 2017 calculated at 8% of the dutiable value of the subject property), which is payable in addition to the ad valorem transfer duty assessed in the ordinary course; and in an annual surcharge land tax assessment (for the 2023 land tax year, calculated at 4% of the land value of the subject property) which is payable in addition to land tax assessed in the ordinary course, and without the tax-free threshold.   Further exemptions In a media release on 29 May 2023, Revenue NSW announced that India, Japan, Norway, and Switzerland are further countries whose tax treaties with the Commonwealth may render the assessment of surcharge purchaser duty and surcharge land tax inconsistent. As such, citizens of those countries will be exempt from assessments for surcharge purchaser duty and surcharge land tax for residential land in New South Wales purchased in their personal capacity. Moreover, as we previously outlined, the liability for both surcharge purchaser duty and surcharge land tax of non-individuals (such as corporations, trustees, partnerships) who are affiliated with the affected countries may be affected by the relevant international treaties.  However, if the non-individual comprises, either directly or indirectly, a foreign person or persons with a substantial interest (or aggregate substantial interest) who are not citizens of India, Japan, Norway, or Switzerland (or, indeed, in accordance with the earlier scale-back, citizens of New Zealand, Finland, Germany, or South Africa), the surcharge regime will continue to be applied.   Refund period extended When the scaling back of the surcharge regime was first announced, Revenue NSW indicated that parties who had paid surcharge purchaser duty or surcharge land tax from 1 July 2021 may have been eligible to apply for a refund. In the latest media release, Revenue NSW announced that parties who have paid either surcharge purchaser duty or surcharge land tax on or after 1 January 2021 may be able to obtain a refund. Whilst Revenue NSW intended to contact potentially affected parties, if a landowner or purchaser/transferee has not been contacted by Revenue NSW, those parties should contact Revenue NSW directly to enquire further, particularly if they believe they may be eligible for a refund of surcharge purchaser duty or surcharge land tax.

Published by Daniel Murray

30 May, 2023

When selling a residential property in NSW, an agent is not entitled to commission or expenses if an agency agreement is not entered into with the vendor. The Property and Stock Agents Act 2002 (NSW) (P&S Act) and the Property and Stock Agents Regulation 2022 (P&S Regulation) set out a number of prescribed terms for agency agreements, although the actual form of agreement is not a mandatory or prescribed format. Many vendors are presented with agency agreements in a standard form, whether the format issued by the Real Estate Institute of NSW or other providers.  These agreements are presented as a 'pro forma', and aside from negotiating a satisfactory rate of commission and agreeing the marketing expenses, most vendors sign away without further thought as to the terms. Usually, these agreements provide for an exclusive agency period (during which the agent named is entitled to commission regardless of who brokers a sale) with a continuing agency period to follow on a rolling basis after the expiry of the exclusive agency agreement.  The P&S Regulation provides the mandatory wording for a warning regarding commission entitlements during an exclusive agency agreement. Whilst these agreements are not in contravention of the P&S Act, in our experience, there are a number of traps that can be avoided and risks mitigated by some pertinent changes to the so-called 'standard' form. In particular: Whilst a vendor of residential property is entitled to a 5 day cooling-off period in respect of an agency agreement under the P&S Act, that cooling-off period can expire on a Saturday, meaning a vendor who wishes to rescind must ensure the time limits are strictly complied with. The term of the exclusive agency period is usually specified to be a period more than 90 days, meaning the agent is entitled to a minimum 30 days' notice of termination after the first 90 days. This can be a particular challenge if the property is not sold in the first 90 days and the vendor is not satisfied with the agent's performance and wishes to end the agreement.  We recommend a shorter fixed period, combined with a specified notice period to terminate the agreement thereafter. Establishing the basis of an 'effective introduction'. Most agency agreements provide for an entitlement to commission, even after termination of the agreement.  We have seen firsthand an agent claim that bulk-email distributions to a database of thousands of recipients, as well as semi-anonymous requests for basic information about a property logged through online real estate platforms, as 'effective introductions'.  We recommend the agency agreements provide clear parameters for what constitutes an effective introduction, with a view to minimising the risk for spurious claims for commission. We also recommend agreements be amended so that if the agreement is terminated prior to a sale being negotiated, the agent is required to provide proper particulars of any parties it claims it has 'effectively introduced' to the vendor or the property. This enables a vendor to manage the risk of double commission being payable once a new agent is appointed, particularly if one of those parties subsequently purchases the property. Payment terms in most agency agreements see the liability for commission crystallise on exchange of the contract (although payable at settlement), even if the contract is terminated or rescinded. Whilst there is some protection for a vendor if the contract is terminated due to a purchaser default, in that the agent's claim can be no less than the deposit held, we suggest that the liability for commission should crystalise at settlement – that is, when the agent has introduced a buyer who can actually complete the purchase. Most agency agreements contain indemnities (from the vendor in favour of the agent) and releases (again, from the vendor and in favour of the agent) which are generally agent-friendly. We negotiate satisfactory amendments to better protect our vendor clients, particularly where an agent has acted negligently or contrary to a direction from the vendor.   In our experience, most agents are willing to accommodate sensible amendments to their standard agency agreements. Given the sums of money at stake when discussing commissions (usually 2% or more of the sale price of the property), vendors should not be afraid to ask for advice on an agency agreement and negotiate pertinent changes to ensure a smoother transaction.  The terms presented by a sales agent are not a 'lay down misère' and can be tailored to your needs.   The McCabes property team has extensive expertise negotiating residential, and other, agency agreements.

Published by Daniel Murray

29 March, 2023