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On-selling a Unit purchased Off the Plan – Duty implications

Definitions:

Off the Plan ("OTP") – the purchase of a strata lot which settles once construction is complete and titles have issued e.g. residential, commercial or mixed-use strata lot.

Subdivision – the purchase of land (with or without improvements) which is conditional upon the buyer (not the seller) obtaining approval from the relevant authorities to subdivide the land

Agreement - commonly referred to as the Offer and Acceptance Contract or simply the Contract

This advice only applies to Agreements entered into after the 1st July 2008.

If you purchase a property off the plan (OTP), the Agreement must be lodged with the Office of State Revenue (“OSR”) within two months from the date of the Agreement.  Duty is payable two years from the date of the Agreement or Settlement whichever comes first.

If you purchase a subdivision property i.e. the offer is subject to the Buyer obtaining approval to subdivide the land, the Agreement must be lodged with OSR within two months from the date of the Agreement. Duty is payable two years from the date of the Agreement or Settlement whichever comes first.

HOWEVER if an OTP or subdivision property is on-sold the first Buyer must notify OSR of the on-sale within two months from the date of the on-sale Agreement.  The Commissioner will reassess the assessment on the first Agreement and issue a new assessment which must be paid within one month.

For example: On the 11th January 2009 the Buyer enters into an Agreement to purchase an Apartment OTP. Settlement is August 2012.  The Agreement is lodged with OSR on the 11th March 2009. Duty is due on the 11th January 2011.  On the 12th April 2009 the Buyer on-sells the property and must notify OSR by the 12th June 2009 of the on-sale.  The Commissioner will reassess the duty assessment on the first Agreement and issue a new assessment showing duty to be due on or about the 12th July 2009.

In the example given above the second buyer must lodge their Agreement with OSR in compliance with the OSR lodgement requirements resulting in the Agreement having to be lodged within two months from the date of the Contract i.e. the 12th June 2009 with payment of the duty on the second Agreement due within one month from the date of the assessment, i.e. on or about the 12th July 2009.

Failure to do comply with these requirements will incur penalties.

For more information refer to the links at the bottom of this page.

Link to Duties Fact Sheet – Conditional Agreements:  http://www.dtf.wa.gov.au/cms/uploadedFiles/CONDITIONAL_AGREEMENTS.pdf

Link to Form “Notification of Further Dutiable Transaction After-Off-The-Plan or Subdivision Conditional Agreement:   http://www.dtf.wa.gov.au/cms/uploadedFiles/NOTIFICATION_OF_FURTHER_DUTIABLE_TRANSACTION_AFTER_OFF-THE-PLAN_OR_SUBDIVISION_CONDITIONAL_AGREEMENT.pdf