September 12, 2022

TGC x FerrierSilvia Property and Construction Industry Event

Here at TGC, we love sharing our expertise and are forever pushing ourselves to be true thought leaders within the world of commercial property. We also enjoy shining a much-deserved spotlight on our team and pay special attention to each and every one of our team members’ experience and contribution to our company and the commercial real estate sector.

In this article, we want to shine that light on our very own industry expert and indispensable team member Paul Hunter.

Meet our Director of Sales: Paul Hunter

Paul’s extensive experience in the Sydney metropolitan market, combined with his distinct style that is both relaxed and approachable while remaining highly professional, distinguishes him from his competitors. His clients appreciate his attention to detail and his ability to work well under pressure. Paul is a well-balanced professional who approaches work, family, and personal endeavours with zeal, structure, and a bit of fun.

Paul recently presented at an exclusive Property and Construction Industry Function hosted by one of our partners FerrierSilvia. Ferrier Silvia is a boutique corporate reconstruction and advisory practice helping clients manage complex business challenges. This was a fantastic opportunity for Paul to share not only his insights but TGC’s. Our staff turned up for our Director of Sales and Leasing in full support, but we also wanted to share the most important aspects of the event with our readers.

Pain points discussed

Paul was joined by Peter Garret (Unsworth Legal), who spoke about changes to stamp duty on call options over land and transferring opportunities before they are exercised, a topic of particular interest to developers, brokers, and land owners.

Paul emphasised that duty is to be charged on a transaction that results in a change in beneficial ownership of dutiable property for the first time under section 8(1)(b)(ix) of the Duties Act 1997. Notably, the new legislation, which went into effect on May 19, 2022, does not apply to options granted before that date.

Amendments to the Taxation Administration Act 1996 (NSW) and the Duties Act 1997 (NSW) were proposed in May 2022 to further regulate transfer duty payment. The Act amendments will, in many cases, increase the tax costs associated with properties transacting in NSW.

Who will be affected by these changes?

There will be three main groups directly affected by these changes:

  • Developers
  • Property Traders
  • Land Owners

What does this mean for commercial property stakeholders?

Not all transactions will be impacted. These amendments are technical and should be considered on a case-by-case basis moving forward. Although not yet tested, we believe that the way property options are written up and the practical implications of transfer duty and payment timeframes will change dramatically. With alterations to the way options are carried out, we are predicting a shift away from options toward heavily conditional contracts. An increase in Joint Venture (JV) projects may emerge where appropriate, rather than transacting the property until development/project maturity.

Will this affect property values?

In our opinion, these changes will mainly only affect development site transactions (with some exceptions). Due to a potentially increased transfer duty liability, developers/property traders, when advised correctly, will simply factor in the cost of this exposure, thus potentially affecting the site’s overall value at the time of the transaction.

The changes come into effect immediately, and if commercial parties were in the process of entering a structured deal whilst not being aware of these changes, this could significantly increase the project’s overall cost. We advise that a tax advisor/accountant and property lawyer be engaged to ensure that any deal you are entering into this is negotiated correctly to ensure that the potential impact from these amendments is managed effectively.

It is essential that you involve these advisors early in your transaction consideration process. This is to ensure that they can effectively link the taxation and legal aspects together seamlessly so that they have an in-depth understanding of the commercial factors relevant to option agreement structures and optimise the economic returns to the parties involved.

Our partnership with FerrierSilvia

Our property experience is extensive, but our success in this industry has come in part from our partnership with FerrierSilvia. They work with us to develop tailored, commercial, and equitable financial solutions when we need them. They help us, so we can help you with all your commercial property needs.  

TGC team suuport and next steps.

TGC’s assessment of how this may affect the sale of real estate is our opinion; we are not equipped to offer accounting or legal advice directly. We are, however, a team of experts who can provide advice and guidance. Please Email us or call on 1300 458 800 for expert guidance if you want to learn more about how this can affect you, your property, or future transactions.

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