A Bank Guarantee is an alternative to providing a deposit or bond directly to a supplier or vendor. It is an unconditional undertaking given by the bank, on behalf of the customer, to pay the recipient of the guarantee the amount of the guarantee on written demand.

Surety bonds provide protection to the contract principal against default by the contractor (builder). A bond is an undertaking by the bond provider to the principal that the contractor will perform in accordance with the terms and conditions of the contract.

The bond is issued in favour of the principal and the contractor pays the premium applicable to the bond provider. Once a surety bond is issued it is irrevocable by the bond provider, who is then committed to pay should the contractor default i.e., builder goes broke.

The National Construction Code (NCC) nominated materials to be non-combustible materials (non-combustible elements) through Parts C1, C2 and C3.

Materials are deems to be non-combustible materials if they are tested in accordance with AS 1530.1-1994 Methods for fire tests on building materials, components and structures – Combustibility test for materials, or is nominated in Part C1 Fire Resistance and Stability clause C1.12 Non-combustible materials under the building regulations.

Non-combustible materials should be nominated as an essential safety measure by the building surveyor/building certifier.

A nominee clause allows the buyer to nominate a third party to accept: a transfer of the business (in the case of a business sale agreement); or a transfer of shares (in the case of a share sale agreement).

In any case, at completion, a buyer has a right to nominate a third party to take a transfer of property from a vendor at common law. Upon such a nomination, a nominee accepts the transfer but is not a party to the contract.

The sunset clause is the statement in the Contract of Sale that refers to the maximum time in which the developer has to finish the project. This time varies across developments, depending on the size of the property. If your property is not finished by this time, you are legally entitled to walk away from your contract and receive your deposit back in full.

The Sunset clause is the maximum time it will take to complete the project and generally it will be finished well within this time. The exaggerated time frame is there to allow for any delays the developer may experience such as industrial action, inclement weather or development funding delays.

Lenders’ Mortgage Insurance protects your lender in the unfortunate event of you defaulting on your home loan. When lenders agree to lend a customer money, there is a small risk that they won’t get the money back if the customer is not able to meet the repayments.

Although they have the house as security, if property values decline that security may not be enough to cover the outstanding loan when the lender comes to sell it.

Division 40 is the legislation which covers the depreciation of ‘plant & equipment’ i.e. the removable fixtures and fittings within an investment property. Each Plant and equipment item has an effective life set by the Australian Taxation Office (ATO) and the depreciation deduction available on that item is calculated using this effective life.

Division 43 otherwise known as ‘Capital Works Allowance’ or ‘Building Write-Off’, covers the deduction available to owners for the structural elements of a building and the items within the property that are deemed irremovable. This includes the foundations, walls, ceiling, and roof and also fixed assets such as tiles, toilets, built-in cupboards, windows and doors.

The primary difference between Division 40 (D40) and Division 43 (D43) is that D40 items depreciate faster. For example, the building structure (D43) can be claimed at a rate of 2.5% over 40 years, while carpet (D40) in a residential property depreciates at a rate of 20% over 10 years.

A conveyancer is a licensed and qualified professional whose job it is to provide advice and information about the sale of a property, prepare the documentation and conduct the settlement process. Conveyancers don’t necessarily have to be lawyers but solicitors often undertake this work.

The most common reasons you would engage a conveyancer is when you are:

  • Buying or selling a property
  • Subdividing land
  • Updating a title (i.e. registering a death)
  • Registering, changing or removing an easement

For the buyer – a conveyancer will:

  • Prepare, clarify and lodge legal documents – e.g. contract of sale, memorandum of transfer
  • Research the property and its certificate of title – check for easements, type of title and any other information that needs addressing
  • Put the deposit money in a trust account
  • Calculate the adjustment of rates and taxes
  • Settle the property – act on your behalf, advise you when the property is settled, contact your bank or financial institution on when final payments are being made
  • Represent your interest with a vendor or their agent.

A Self-Managed Super Fund (SMSF) is a superannuation trust structure that provides financial remuneration to its members in retirement. The main difference between SMSFs and other super funds is that SMSF members are also the trustees of the fund.

The difference between an SMSF and other types of funds is that the members of an SMSF are usually also the trustees. This means the members of the SMSF run it for their benefit and are responsible for complying with the super and tax laws.

Generally a SMSF can only pay a member’s super benefits when the member reaches their ‘preservation age’ and meets one of the conditions of release, such as retirement. The payment may be an income stream (pension) or a lump sum, depending on the circumstances.

Payments of benefits to members that have not met a condition of release are not treated as super benefits – instead, they will be taxed as ordinary income at the member’s marginal tax rate.

An SMSF must run for the sole purpose of proving retirement benefits for the members or their dependants. Don’t set up an SMSF to try to get early access to your super, or to buy a holiday home or artworks to decorate your house. These things are illegal.

A copy of the SMSF Deed is also required when signing a contract of sale.

FIRB is an Australian Government department that assesses application from foreigners who would like to invest or buy a home in Australia. If you would like to buy real estate either to live in or as an investment then you may be required to obtain FIRB approval.

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