Suncorp Metway CEO declares a bright future for Queensland Property Market


At last there is educated commentary coming from the banking sector declaring its confidence in the Queensland property market. Suncorp Metway CEO, John Mulcahy says, "there is still a long way to go" in the Queensland property market and predicts a soft landing rather than a crash. While the market has definitely slowed in Sydney and Melbourne, Queensland's number 3 home lender says the market in Queensland is underpinned by strong population growth, particularly in the SE corner between the Sunshine Coast and the Gold Coast.


Land shortage makes prices skyrocket

Vacant land stock close to Brisbane is disappearing fast. Recent figures released by the REIQ shows average vacant land prices jumping between 50 and 100 percent in the last 12 months. On current interstate and overseas migration rates, Brisbane's population will increase by 132,000 by 2016. Available land can accommodate 82,000. At this rate, the Broadacre Study 5 for the Brisbane City Council indicates Brisbane has less than 10 years land supply left! Queensland State Government planning and development as well as all local government councils in South East Queensland Brisbane City are aware of the pressure on land and housing. The greatest impact on prices is demand far outstripping supply. It is not uncommon for entire subdivisions to be presold 8 months prior to release despite increases in prices.



This pressure on land is also underpinned by people taking advantage of increased equity and a strong property market to sell older stock and upgrade into newer housing estates that offer larger living areas and modern designs.



Up to 40% of the value of commercial property can now be advanced when combined with a residential property refinance or purchase.

The inclusion of commercial property as an acceptable security is a departure from the traditional battery of lending obstacles faced by successful business owners. Many businesses have invested in their own commercial premises such as shops, strata offices, factory units and warehouses for the tax, rent savings and investment benefits. However, lending practices of most banks do not allow business owners to access the equity in commercial property to use for residential property purchases or business. Now there is a real alternative.

Examples:

Orlando is a professional. His company has a commercial loan for the professional office where he runs his business and he pays rent. Orlando would like to build a new home but his bank won't consider using the commercial strata office as security. This means Orlando has to come up with a cash deposit.

Helena has a retail business she has run from a rental commercial premises for over 10 years. The shop is now up for sale. Using the equity in her own home she can now buy the shop at home loan interest rates.



Electrical safety switches

Queensland has become the first state in Australia to make electrical safety switches compulsory in all homes. The new reforms are part of the state governments “Safer Workplaces, Safer Homes” strategy to improve electrical safety. The recently introduced laws apply to all types of residential property. Safety switches have been compulsory in new homes since 1992.



Sellers must declare whether their property has a safety switch installed. This legislative requirement is achieved by inserting a Special Condition in the contract of sale. The latest edition of the REIQ Contract has this clause inserted. (5th Edition) for House and Land.

Within 90 days after the Buyer takes possession of the property, the Seller must give the Regulator written notice of the existence or lack of an Approved Safety Switch on the Land under the Electricity Act.

It is up to the buyer to ensure the safety switch has been installed.

False or misleading information may incur a penalty. If in doubt, you should have a qualified and licensed electrician give advice before completing this special condition.
 

G.S.T.                            Got to frequently asked questions -

Selling commercial property 

GST will apply to the sale of all commercial property by a registered business on or after 1 July 2000. Under the transitional rules, GST will apply to commercial property made available (usually the date of settlement) to the buyer on or after 1 July 2000. The seller must pay GST on the full amount of the sale value of the property unless the seller is eligible for and chooses to use the margin scheme. 

If the buyer is registered for GST the buyer may be able to obtain an input tax credit for the GST included in the selling price  of the property. If the buyer is not registered or will use the property to make input taxed supplies, the buyer may prefer that the seller calculate GST using the margin scheme. However, there are restrictions in the circumstances in which the margin scheme can be used. Further information on the margin scheme is contained in this booklet. 

Renting commercial property

GST will apply to leases of commercial property entered into from 1 July 2000. Leases entered into before 1 July 2000 that continue beyond that date will be subject to the following transitional provisions: 

If the lease was entered into before 2 December 1998, full consideration was paid before that date and there is no review opportunity, GST will not apply to the lease for its duration. If there is a review opportunity it will not be subject to GST until that time. 

NOTE
Rental agreements must be written agreements. 

If the lease was entered into on or after 2 December 1998 and before 8 July 1999 and the lessee is able to obtain a full input tax credit for the GST included in the rent, GST will not apply to the lease until 1 July 2005 or the first review opportunity (whichever is the earlier).  If the lease was entered into on or after 2 December 1998 but before 8 July 1999 and the tenant would not be able to obtain a full input tax credit for the GST included in the rent, GST will apply to the lease from 1 July 2000.  If the lease is entered into after 8 July 1999, GST will apply from 1 July 2000. For more information on lease arrangements and contracts, please refer to the ATO's transitional fact sheet, GST transitional arrangements - contracts which span the implementation of GST, or phone the business Tax Reform Infoline on 13 24 78.  NOTE A review opportunity means an opportunity for the lessor to change the rent because of GST, or the lessor is able to conduct a general review, renegotiation or alteration of the rent. If the only opportunity in a lease is to adjust rent using a set formula (such as a review based on the consumer price index), which does not allow the rent to be altered to pass on GST, then the lease would be considered a non-reviewable contract for GST purposes. 

Leases where rent is based partly on turnover

GST will apply to rents calculated on a base rent plus a percentage of turnover. Parties to such leases should carefully consider the impact of GST on the amount of rent payable under the turnover-based portion of the rent. 

Lease inducements on property 
Fit-outs 
If a landlord provides a free fit-out to the tenant there is no additional GST liability as the fit-out would simply be supplied as part of the rented premises. The landlord would be charged GST by the fit-out contractor and would generally be able to claim an input tax credit. The landlord would not have to pay any GST on the supply of the fit-out to the tenant provided no other consideration is made. 

NOTE
Rent-free periods are not subject to GST. 

Incentives for securing and surrendering a lease 
Where a lessor provides a cash incentive or other consideration to a tenant as an inducement to enter into a lease, a taxable supply has been made by the tenant who is liable for GST on the payment. 

GST is payable on cash incentives such as lease premiums paid by tenants to secure a lease. The lessor is liable to pay GST on the incentive received. 

The surrender of a lease for consideration is a taxable supply. If payment is made by a tenant for the surrender of a lease, GST is payable by the lessor. If a payment is made by a lessor to a tenant for the surrender of a lease, GST is payable by the tenant. 

Frequently asked questions        

COMMERCIAL PROPERTY 

Will GST apply to the sale price of commercial property? 
GST will apply to the sale price of all commercial property by a registered entity, such as commercial property owners with annual turnover (including rental income) greater than $50,000. Entities who generate turnover (including rental income) less than $50,000 may choose to register for GST.
GST will apply to commercial property sales that are settled on or after July 1,2000. The seller must pay GST on the full amount of the sale value of the commercial property unless the seller is eligible for and chooses to use the margin scheme, or the property is sold as a going concern. 

Can the buyer of a commercial property claim a credit for the GST included in the sale price? 
If the buyer is registered for GST, then the buyer may be able to obtain an "input tax credit". The claim will depend on whether the seller has applied the margin scheme to calculating the GST liability. Prior to making an offer to buy commercial property the buyers of commercial property should determine how the GST has been calculated. 

Will GST apply to commercial property rentals? 
GST will apply to leases of commercial property entered into from July 1, 2000. Transitional provisions cover leases entered into prior to July 1, 2000. Full details of the transitional provisions are available from the ATO.

 
Will GST apply to the outgoings associated with the Lease? 
GST will apply to most of the outgoings. Some of the exceptions include rates and taxes, and financial services such as bank fees and interest charges. 

Should all commercial property owners register for GST? 
GST will apply to the sale of all commercial property by a registered entity, such as commercial property owners with annual turnover (including rental income) greater than $50,000. Commercial property owners who generate turnover (including rental income) less than $50,000 may choose to register for GST. A property owner must group all of his or her enterprise together' to determine whether to register for GST .
If an unregistered commercial property owner also does not have an ABN (Australian Business Number) to include on rental invoices issued to a tenant, then there is a risk that the tenant will be required to submit part of the rental payments directly to the ATO. In this situation the unregistered commercial property owner may consider the merits of just applying for an ABN. For further information on the implications of GST and PAYG, owners should contact their financial advisers. 

Disclaimer. You should seek your own independent advice as to the accuracy of the information supplied.