There are a number of components purchasers and vendors should be aware of when entering into a contract for the sale of land and working towards settlement.
One important requirement that tends to get overlooked is with respect to the service of tax certificates, in particular land tax certificates pursuant to the Land Tax Management Act 1956 (LTM Act) and foreign residents capital gains withholding clearance certificates (Withholding Clearance certificates).
Commonly in conveyances the vendor attends to acquiring these certificates from a provider, such as InfoTrack as well as the Australian Taxation Office (ATO) and provides the documents to the purchaser prior to settlement.
Land Tax Certificates
Land tax certificates are acquired from search providers and are to be ordered per property that is up for sale. For example, in a sale of four properties, four land tax certificates will be required, one for each property. Special conditions in a contract of sale will usually prescribe that a certificate is served “not less than seven (7) days before completion”. Special conditions are provided by solicitors to supplement the standard conditions of a contract of sale.
This requirement is also referred to under the requisitions on title. However, it is important to note that requisitions do not form part of the contract, rather they are a formal request to ascertain answers to questions which are not directly included in the contract of sale.
Schedule 3 of the Conveyancing (Sale of Land) Regulation 2022 (the Regulation) provides that a purchaser does not have to settle until 14 days after provision of the certificate. See excerpt as follows (emphasis added):
2 Land tax certificate—contracts completing in 14 days or less
(1) The vendor must serve a current land tax certificate on the purchaser on the day that the contract is made.
(2) The purchaser does not have to complete the contract before the date on which the certificate is served.
3 Land tax certificate—contracts completing in more than 14 days and contracts where no completion date agreed
(1) The vendor must serve a current land tax certificate on the purchaser at least 14 days before completion of the contract.
(2) The purchaser does not have to complete the contract earlier than 14 days after service of the certificate.
Withholding Clearance Certificates
Withholding Clearance certificates are acquired from the ATO and apply to vendors. For example, in a multiple land transaction with the same vendor, only one withholding clearance certificate will be required to ascertain whether the Vendor or Entity is liable to withhold a percentage of funds due to residency status. Pursuant to clause 31.4 of the Law Society standard conditions it says:
If the vendor serves any clearance certificate or variation, the purchaser does not have to complete earlier than 7 days after that service and clause 21.3 does not apply to this provision.
The ATO may take up to 28 days to process a withholding clearance certificate so remember to order this as a priority in case processing takes the full 28 days.
If you’d like to read more:
- ATO Website: https://www.ato.gov.au/Individuals/Capital-gains-tax/In-detail/Foreign-resident-capital-gains-withholding/Capital-gains-withholding—Impacts-on-foreign-and-Australian-residents/
- Land Tax Management Act 1956: https://legislation.nsw.gov.au/view/html/inforce/current/act-1956-026#sec.47
- Conveyancing (Sale of Land) Regulation 2022 https://legislation.nsw.gov.au/view/whole/html/inforce/current/sl-2022-0485