Residential Land Withholding Tax - Agreement For Sale and Purchase of Real Estate Ninth Edition 2012 (4)

In conjunction with REINZ, the ADLS Documents and Precedents Committee is pleased to announce that an updated version of the Sale and Purchase Agreement is now available. This updated version takes into account the residential land withholding tax regime that comes into effect on 1 July 2016. 

The new Agreement includes a new clause that specifically addresses residential land withholding tax. It sets out the procedure that will be followed when the vendor does not have a conveyancer acting for them or the situation where the vendor and purchaser are 'associated persons'. New definitions have been inserted to correspond to those used in the legislation.

Practitioners may wish to customise the Ninth Edition (3), the Auction, and/ or Tender forms, at their own discretion by inserting the new clause and definitions as Further Terms of Sale. New versions of the Auction and Tender forms incorporating these changes will be released over the coming weeks. 

The new Agreement is available via WebForms and in hardcopy from the ADLS Bookstore. A highlighted copy of the agreement showing the new additions is available here.
 
Any questions should be directed to the Professional Services Manager, Jodi Libbey Jodi.Libbey@adls.org.nz.

ADLS include below the new clause and definitions that will be present in the updated agreement. They are provided to be of assistance for the interim period until the new agreement is released. Note, numbering should be updated dependant on the Agreement.

To be added to the Further Terms of Sale page to be included by reference to clause 1.0 Definitions, time for performance, notices and interpretation:

(  ) "The terms “associated person”, “conveyancer”, “residential land purchase amount”, “offshore RLWT person”, “RLWT”, “RLWT certificate of exemption” and “RLWT rules” have the meanings ascribed to those terms in the Income Tax Act 2007."

(  ) "The term “Commissioner” has the meaning ascribed to that term in the Tax Administration Act 1994." 
 
The following can be added to the Further Terms of the Sale as a discrete clause:

"1.0   Residential Land Withholding Tax

1.1     If the vendor does not have a conveyancer or the vendor and the purchaser are associated persons, then:

(1)   the vendor must provide the purchaser or the purchaser’s conveyancer, on or before the second working day before the due date for payment of the first residential land purchase amount payable under this agreement, with:

(a)   sufficient information to enable the purchaser or the purchaser’s conveyancer to determine to their reasonable satisfaction whether section 54C of the Tax Administration Act 1994 applies to the sale of the property; and

(b)   if the purchaser or the purchaser’s conveyancer determines to their reasonable satisfaction that section 54C of the Tax Administration Act 1994 does apply, all of the information required by that section and either an RLWT certificate of exemption in respect of the sale or otherwise such other information that the purchaser or the purchaser’s conveyancer may reasonably require to enable the purchaser or the purchaser’s conveyancer to determine to their reasonable satisfaction the amount of RLWT that must be withheld from each residential land purchase amount;

(2)   the vendor shall be liable to pay any costs reasonably incurred by the purchaser or the purchaser’s conveyancer in relation to RLWT, including the cost of obtaining professional advice in determining whether there is a requirement to withhold RLWT and the amount of RLWT that must be withheld, if any; and

(3)   any payments payable by the purchaser on account of the purchase price shall be deemed to have been paid to the extent that:

(a)   RLWT has been withheld from those payments by the purchaser or the purchaser’s conveyancer as required by the RLWT rules; and

(b)   any costs payable by the vendor under subclause 4.1(2) have been deducted from those payments by the purchaser or the purchaser’s conveyancer.

1.2     If the vendor does not have a conveyancer or the vendor and the purchaser are associated persons and if the vendor fails to provide the information required under subclause 4.1(1), then the purchaser may:

(1)   defer the payment of the first residential land purchase amount payable under this agreement (and any residential land purchase amount that may subsequently fall due for payment) until such time as the vendor supplies that information; or

(2)   on the due date for payment of that residential land purchase amount, or at any time thereafter if payment has been deferred by the purchaser pursuant to this subclause and the vendor has still not provided that information, treat the sale of the property as if it is being made by an offshore RLWT person where there is a requirement to pay RLWT.

1.3     If pursuant to subclause 4.2 the purchaser treats the sale of the property as if it is being made by an offshore RLWT person where there is a requirement to pay RLWT, the purchaser or the purchaser’s conveyancer may:

(1)   make a reasonable assessment of the amount of RLWT that the purchaser or the purchaser’s conveyancer would be required by the RLWT rules to withhold from any residential land purchase amount if the sale is treated in that manner; and

(2)   withhold that amount from any residential land purchase amount and pay it to the Commissioner as RLWT.

1.4     Any amount withheld by the purchaser or the purchaser’s conveyancer pursuant to subclause 4.3 shall be treated as RLWT that the purchaser or the purchaser’s conveyancer is required by the RLWT rules to withhold.

1.5     The purchaser or the purchaser’s conveyancer shall give notice to the vendor a reasonable time before payment of any sum due to be paid on account of the purchase price of:

(1)   the costs payable by the vendor under subclause 4.1(2) that the purchaser or the purchaser’s conveyancer intends to deduct; and

(2)   the amount of RLWT that the purchaser or the purchaser’s conveyancer intends to withhold."

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