Buying your principal place of residence
It is very important that you establish exactly who the owners of the property are going to be before you sign the Contract. Most people buying their principal place of residence will usually buy the property in their joint names. You may need to reconsider this if one of you has a high risk occupation (e.g. lawyer, doctor, accountant or other professional) or one of you is the sole director of a company which operates a business. Sometimes it is better for asset protection purposes that the spouse or partner who is not engaged in any trade or profession that could put them at risk of being sued is the preferred owner of the property.
Buying an investment property
If you are buying an investment property, most people buy this in their personal names in order to obtain the negative gearing tax deduction. Once again, if you are in a high risk profession or run your own business, you are putting your personal assets in the firing line of creditors in the event that you are successfully sued or you are made bankrupt. An alternative strategy may be to purchase the investment property in the name of your spouse or partner or create an investment trust. You should also be careful not to purchase any property in the name of your trading company or your trading trust as this could expose those assets in the event of the business being sued or being put into liquidation.
Consequences of putting the wrong parties on the Contract
You cannot just add parties to a Contract after it has been signed or enter into a new Contract if you get the parties to the Contract wrong. There are stamp duty consequences of entering into the Contract and it could be that you are up for double stamp duty in the event that the matter is not handled correctly. For example, stamp duty payable on a $500,000 purchase for an investment property is $15,925.00 in QLD. If you entered into a Contract with incorrect details shown as the purchaser, you may have to pay that amount twice along with any penalties or fines imposed by the Office of State Revenue.
Things to do before you sign a Contract
- check with your accountant that you have the correct entity as the Purchaser in the Contract;
- check with your lawyer that the proposed entity or person is consistent with your estate planning(e.g. your Will
and Powers of Attorney etc.);
- always have your lawyer check the Contract BEFORE YOU SIGN!
Should you require any further information in relation to this issue, please do not hesitate to contact our Property and Commercial Department Manager, Holly Gilholme on 07 5506 8202 or Freecall 1800 621 071 or email firstname.lastname@example.org.
Visit our Conveyancing web-page for more information and articles. We have a specialist Conveyancing team that has senior commercial lawyers, licenced conveyancers and highly trained and supervised paralegals to get the job done.
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- Body Corporate and Management Rights
- Buy/Sell Agreements
- Estate Planning and your Business
- SMSF to Purchase your Property
- Tips when Purchasing a Property