QLD Buy Now.. Pay 5 years later

May the good times never stop.

Buy now, pay in 5 years: Brisbane developer offers deferred settlement on units

here is the "catch".

Under the plan, buyers who pay a "reasonable" deposit – of $60,000 or more – can take possession of a unit and pay monthly lease fees – equivalent to rent – and settle only in five years, when the developer would hand over the title, Mr Ash said.

 

Just an instalment contract.

 

Wonder how the risk of settlement is dealt with. I imagine developer is really anticipating that some fail to settle and all the gain goes to them.

The bigger problem however is GST. Developer is bound to report and pay it all on the first instalment eg when $60K is paid. So almost all of the cash is taken by the ATO. What is in it for a developer ? (A smart one at least)
ATO ID 2004/181 - Is the entity, a property developer, required to apply the attribution rules in accordance with section 29-5 of the A New Tax System (Goods and Services Tax) Act 1999 (GST Act) and attribute all the GST payable on its taxable supply of land to the tax period in which it receives the first instalment payment from the purchaser?

What occurs if the sale fails to occur ? GST previously paid may be outside period and time to amend. Lost perhaps ?

The Developer likely may lose full or partial entitlement to GST on the build too. Since the supply is mixed (sale by instalment but also input taxed rents). I havent seen a ruling but imagine it would be needed to support a claim for GST on the build.

If a developer tried to use this arrangement to argue rents were earned for five years and hence no GST on sale I would think the ATO would attack it as a scheme. Supply attributes to the time of the first instalment and so the 5 years rule wouldnt work.

Given that some contracts now require the buyer to withhold and remit GST at settlement this could even be a concern.

 

Hi

I wish I could find someone to sell me acreage in Victoria on these terms.

Regards,

alicudi

 

It's good to see developer's getting creative to help move the last stock in the development. This will trigger installment contract provisions which means buyers will have protections under the Property Law Act 1974 (Qld)

 

Interesting, I would be most interested in this arrangement.

 

The 'arrangement' may look ok, but are you sure that a unit in this 228 lot development in Brisbane is the best investment for you?

 

Is that similar to the rent to buy stuff and where you are banking of defaults so you keep everything ?

 

No. It is like a 42 day settlement period extended to potentially 30 years with the purchaser taking possession before settlement.