Purchasing another residence 108-04070020

Item

Description

1

QSS32 - Purchase of new residence

You have advised of the purchase of a new home and we are requesting further information regarding the purchase.

This may affect your rate of payment.

Questions:

As you have purchased a home, complete and return the following questions, or the documents that provide this information.

What was the total cost of the new home?

What was the settlement/completion date of new residence?

Has your former home been sold?

If yes, what was the net amount received from the sale of your former home after all sale expenses were deducted?

If yes, where were the proceeds of the sale of your former home deposited (including the relevant dates and amounts)?

Was your former home gifted or sold for less than its market value?

Is the new home on a block larger than two hectares or on more than one title?

If yes, please provide a completed Module R - Real estate details form.

Is any part of the new home used for income producing (not including boarders and lodgers)?

If yes, please provide a completed Module F - Business details form.

Is the new home owned by a private trust?

If yes, please provide a completed Module PT - Private Trust form.

Is the new home owned by a private company?

If yes, please provide a completed Module PC - Private Company form.

2

Q999 - Extended exemption

Thank you for requesting an extension to the exemption for the proceeds of the sale of your former home, that you are using to build or purchase another home.

The information you provided means the exemption period has been extended until xx/xx/xx.

You need to advise Services Australia within 14 days of when you move into your new home.

Failing to advise may affect your rate of payment.

Example

Description

1

Attempts to obtain a new principal home not within a reasonable period

An extended exemption does not apply if the customer has not made reasonable steps to obtain a new principal home within a reasonable period (i.e. 6 months) of the sale of the old principal home.

Example: Sam and Jenny sold their principal home on 20 December 2006. They went overseas and came back to Australia on 30 October 2007. They entered into a contract of sale to purchase a new home on 15 December 2007 and settlement occurred on 15 March 2008. In this case, although Sam and Jenny made reasonable attempts (that is, they entered into a contract of sale to purchase a new home within 12 months) they did not make those attempts within a reasonable period (that is., within 6 months) from the date of sale. In this case, Sam and Jenny cannot gain an extended exemption for principal home sale proceeds.

2

Delays out of customers control to obtain a new principal home within initial 12 months of sale

Examples include but are not limited to:

• Delays in obtaining building approval from local shire council. This has in turn delayed entering an agreement with a builder
• Caring for a close family member in a separate location to the place the customer is to build their new principal home
• Customer is hospitalised for an extended period
• Demands on the building industry are stretched in a particular area, for example due to a natural disaster like a flood or cyclone damage to area

Example: The Smiths sold their principal home in October 2007. They purchased a block of land in January 2008 and, due to delays with developers, were unable to commence building on the land until June 2008. The Smiths signed a contract in June 2008 for completion of the building by January 2009. The builder also experienced delays and the new home was only partially complete by January 2009. The builder estimates completion of the home by March 2009. In this case, the Smiths are eligible for the extended exemption for the period from October 2008 to the end of March 2009 as they:

• made reasonable attempts (that is, buying a block of land and signing a contract to build a home within 12 months)
• made those attempts within a reasonable period (buying a block of land within 6 months), and
• experienced delays beyond their control (developer and builder delays)

Evidence

Documentary evidence is required to support the extended exemption, for example, correspondence from the local shire council or builder.

3

Assessment of land already owned by the customer to be used to build a new home

The maximum total asset value that may be exempt is the value of the proceeds of the sale of the old principal home.

Example 1: Sally purchased a block of land for $100,000 before selling the principal home. Sally sold the principal home and received $350,000 on 30 July 2007. Sally used some of the proceeds to pay off the mortgage on the block of land. The balance of the settlement money went into a bank account. Sally intends to use this to build a new principal home on the block of land. In this case, the block of land and the money in the bank account can be exempt from 30 July 2007.

Note: the exempt value of the land and the money in the bank account is the lesser of the amount received for the old house and the amount they will spend on the new one including the land.

Example 2: John has a block of land worth $200,000 with a $100,000 mortgage. John sells the principal home for $300,000 and intends to build on the block of land. John uses $100,000 from the sale proceeds to pay off the mortgage on the land and intends to use the balance of the funds ($200,000) to build a new principal home.

The value of equity in the land and money from the proceeds of the sale is $400,000; this is $100,000 more than the amount received from the sale. An exemption applies only to $300,000 (the amount the principal home sold for). The exemption would apply to the amount paid to pay off the land ($100,000) and the balance of funds from the sale ($200,000). The $100,000 equity previously owned for the land is still an assessable asset as the exemption amount cannot be more than the proceeds from the sale of the old principal home.

Example 3: Henry purchased a block of land for $150,000 before selling the home. Henry sells the principal home for $400,000 and intends to use the entire sale proceeds to build on the land. As Henry already owned the block of land, which was already assessed under the assets test before selling the principal home, the land remains assessable until the build of the new principal home has been completed. Once the new home is complete and any sale proceeds exemption ends, the land can now be considered the principal home.

Note: the customer must uniquely identify the location of any real estate or business site they own or have an interest in.