Our readers may have already read our "Doing Business in Australia" series of articles posted before. Recently quite a few relevant facts and policies have been updated. Hence we have produced a new version. You will be able to receive the updated articles about "Doing Business in Australia" in the coming weeks.
Real Property
When buying or selling land in Australia, there are a number of important matters that need to be taken into consideration. As a buyer, it is crucial to carry out a thorough investigation of issues such as the title to the land, the condition of any structures on the land, the use to which the land can be put in accordance with local planning laws, whether Federal Government approval is required for the purchase and the taxation consequences of the acquisition. This is commonly referred to as conducting ‘due diligence investigations’. As a seller, there are statutory obligations which must be met, including providing a potential buyer with the requisite statutory disclosure documentation.
Torrens Title Land
In terms of title, most land in Australia operates under a system of land registration known as the Torrens system. If a party wishes to buy or sell Torrens title land in Australia, it must do so by registering its interest in the land on the relevant Torrens register. The register confers on the registered proprietor an “indefeasible title” to that interest. Two other systems of land that exist in Australia are Crown land and the common law deeds system, also known as Old system title. These systems are far less common than Torrens title and are usually found when dealing with rural land.
Contract between Buyer and Seller
When buying or selling land in Australia, a written contract will generally be entered into between the buyer and seller. These contracts contain provisions commonly used in the relevant state jurisdiction and ‘special conditions’ which are inserted by the representative acting for a seller. Often there are also terms not set out in the contract itself, but which are implied by law. It is important for sellers to comply with such implied terms and for buyers to be aware of their potential rights should the seller fail to comply.
You should not sign any contract or document before consulting a lawyer and obtaining expert advice. Once signed you may be legally bound and unable to reconsider.
The usual conveyancing period between the time the parties enter into a contract and the date of completion of the contract (also known as ‘settlement’) is 30 - 90 days. On completion, the title is transferred to the buyer in return for payment of the purchase price, which is adjusted for outgoings which concern the land (such as council rates and land tax) and any income from the land.
Duties and Taxes
When buying or selling land, it is also important to consider the taxation consequences. In particular, liability to pay state government stamp duty and land taxes, federal government Goods and Services Tax (GST) and Capital Gains Tax (CGT) should be considered.
State Governments charge stamp duty on the purchase of land calculated as a proportion of the ‘dutiable value’ of the land, usually being the purchase price. Land tax is charged at a much lower rate than stamp duty, but is payable annually by the owner of the land, unless the owner is exempt under the relevant statute. The type of ‘entity’ (eg: individual, company, trustee) that purchases the land may affect the entity’s subsequent land tax liability.
Generally, a seller of land will be liable to pay GST on the sale of land at a rate of 1/11th of the purchase price, unless an exemption applies (eg: the sale of certain existing residential dwellings). The seller may decide to require the buyer to reimburse the seller for the GST liability, in which case the buyer must consider whether it can claim a corresponding tax credit from the ATO for the amount of the reimbursement.
Structuring
Before buying any land in Australia it is very important that you obtain expert advice as to how to structure the purchase. You need to obtain advice as to whether you should buy it in your name, a company, trust or other entity. A failure to structure the purchase correctly can create adverse taxation and other consequences in the future.
Leasing
As an alternative to buying land, it may be preferable to enter into a lease of land. A lease usually confers a right of exclusive possession of the land for a fixed period of time. As with buying land, dealings with leases are usually registered on the relevant Torrens register but this varies from state to state. In Australia the lease of a shop or other premises located in a retail shopping centre will be regulated by ‘tenant friendly’ retail leasing legislation. This legislation contains mandatory provisions with which the lease or the land owner must comply, including provisions relating to disclosure, fit-out, disturbance, relocation, advertising and promotion and assignment. Commercial (non-retail) leases are not governed by retail leasing legislation but will be subject to other statutes, such as the Real Property Act 1900 and Conveyancing Act 1919 in New South Wales.
Consent for Use or Development
Whether buying or leasing land in Australia, it is important to consult the relevant planning and other authorities, statutes and instruments to ensure that the proposed use or development of the land is permissible and, if so, determine whether any further consents from the relevant planning or other authorities must be obtained before that use or development may occur.
Agents
If you want to buy land it is likely that you will need to deal with an Agent. The selling agent is the vendor’s agent, not yours or the buyer’s agent. Therefore the Agent is legally obliged to look after the vendor’s interests, not the buyer’s.
Foreign Investment Review Board (FIRB)
The purchase of an interest in certain types of real estate by a Foreign Interest generally requires federal government approval following examination and recommendations made by the FIRB. An ‘interest’ includes buying land but can also include entry into a lease, financing or profit sharing arrangements. This is another reason why a contract should not be signed until you have consulted a lawyer.
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To view our previous news for Chinese investors and various articles in relation with the topic ‘Doing business in Australia’, please click the button on the upper-right hand corner on our WeChat platform, and choose ‘view history’. The contents include:
Business set up in Australia, business structures,company administration, etc.
Background information of Australia, including Australian government, legal system, and business structures, etc.
Laws and regulations in various common areas, including protection of technology and intellectual property, anti-trust and consumer law, contract law, business migration, real property, public takeovers, and electronic commerce etc.
