This is an often asked question by Purchasers and Real Estate Agents. Typically, someone will have bought a property at auction in their own name or for an off the plan development and then decide they want to buy the property in the name of their spouse or some other entity like their Superannuation Fund.
The decision to change names often happens after the purchaser has discussed the purchase with their accountant and/or solicitor and considered things like asset planning, funding and asset protection.
Most people seem to think they can simply change the “purchaser’s name” on the contract by inserting the words “or nominee” on the contract.
That process in most cases will not work and will result in you paying double Stamp Duty.
In New South Wales the name on the Contract needs to be the same name on the Transfer. On a $1 million purchase price the Stamp Duty payable is over $40,000.00.
If the purchaser on the Transfer document is different from the Contract, then the Transfer will be treated as a sub-sale, resulting in a second or additional Stamp Duty amount of over $40,000.00 being payable, (total of $80k plus).
There is a limited exemption set out in the Duties Act that allows the ultimate purchaser to be a different person from the purchaser in the Contract, so long as they are “related persons” as defined.
A related person includes a spouse, parent and child. It can also be a private company where the person is a director or majority shareholder of that company. It can also be a Trust where the natural person is a beneficiary of the Trust. There is a catch. For that section of the Duties Act to apply, the ultimate purchaser must have been in existence when the Contract was entered into. You cannot form the Company or Trust after the date of the first Contract.
If the “related person” exemption is not available, then your only real alternative is to persuade the seller to rescind the original Contract by agreement and enter into a new Contract.
There is no obligation on the seller to do this and if they do, undoubtedly you will end up paying the sellers legal costs of the rescission of the initial Contract and the preparation and exchange of the new Contract.
The best option is to seek appropriate advice as to the purchasing entity, prior to buying and entering into the Contract in the correct name from the beginning.
Our property team at Everingham Solomons can assist you with all your property related matters, because Helping You is Our Business.