When a buyer is making an Offer on behalf of a trust, a trip to an accountant could be the difference between a hassle-free settlement, or double stamp duty.
For tax purposes, accountants sometimes advise trustees to have offers written in a specific way. For example, in a past settlement case, Mr Townsend’s* accountant advised him to have the Offer written as ‘Townsend Pty Ltd as trustee for Townsend Family Super Fund’, for tax purposes.
Unfortunately, Mr Townsend had already made the Offer, and had it accepted, under the name ‘Mr Townsend as trustee for Townsend Family Super Fund’.
The real estate agent submitted a contract variation requesting that the name on the Offer and Acceptance be changed. However, such a change is impossible: it is illegal to make a variation to the buyer’s details.
To make the change, Mr Townsend cancelled the existing contact (through mutual agreement with the seller) and completed a new Offer and Acceptance with the modified details.
But because of this, Mr Townsend faced having to pay double the amount of stamp duty – one for the original contract, and one for the new contract.
For such a seemingly small change, this is a huge amount of money.
To help buyers avoid a situation like this, real estate agents can check that trustees who wish to make an offer have sought financial advice first. This can help in two ways:
- The buyer will avoid putting the wrong name on the contract, and
- A trust deed can be drawn up or amended to include the property.
A trip to the accountant is well worth avoiding trouble during settlement.
* Mr Townsend’s name has been changed for this article.
Image by Mike Poresky.