Often sophisticated property buyers want to make a move on a property acquisition but don’t want the transaction to fall into this taxation year.
Instead, they want to defer it until the next Financial Year.
“But is it that important” the naive amongst you may ask.
Well, put yourself in their shoes. If you had a big tax bill to pay, when would you rather pay it? This year or next year.
It’s at this time that Accountants and Lawyers pull out of their bottom drawer “Put and Call Options”. These are an effective strategy to achieve this purpose.
However there is a lot more to Put and Call Options than just this. They also serve a number of other purposes which may be of interest to readers.
What are they?
1. Marketeers, Investor Groups and Clubs may want to tie up a number of blocks of land from say, a Developer, with the aim of on selling them to their members or the public. They may put a hold on say ten blocks under a Put and Call Option which allows them to exercise the Option to buy the blocks one at a time.
[sam id=32 codes=’true’]They will do that when they find someone who wants a house and land package or where they can on sell the block with a mark up.
The vehicle of an Option is a more adaptable way of doing this rather than contracting to buy a block and then on selling it.
2. A promoter of a development project may need more time to put together a group of investors to develop a project and needs the flexibility to nominate another entity to acquire the property closer to the settlement date.
Use of an Option Deed will facilitate these types of transactions.
3. A builder may want to tie up a number of properties in a development on a long term basis so they have the ability to construct “spec homes” on them. Once they have found a buyer of each spec home, they will nominate them as the Buyer of one of the blocks under the Option Agreement and enter into a Building Contract with them.
4. The same builders may need longer settlements but don’t want the expense of stamp duty liabilities that are usually triggered within a month or so of entering into a formal contract. If they utilise an Option they put the property on Lay Buy until they decide when they want to buy it. Then they exercise the Option creating a Contract of Sale when they make that decision. The time for payment of stamp duty starts to run from then.