Rules tightening around mortgagee sales
The government is changing the law to make it more difficult for property investors in trouble to arrange "de facto" mortgagee sales and avoid paying GST owed.
Friday, November 6th 2009, 9:18AM
by Rob Hosking
The changes are included in a discussion document released by Revenue Minister Peter Dunne yesterday.
At present, the Goods and Services Act tightly defines what is a mortgagee sale and allows the GST component to be recovered by the Inland Revenue Department (IRD). Investors who are in trouble are making arrangements which make it appear the mortgagor, not the mortgagee, is carrying out the sale.
The proposed changes give the IRD powers to deem a sale a mortgagee sale if it has one or more of the following characteristics:
- A mortgagee taking control of, or inducing the sale of, the property by exercising a power under a contract with a mortgagor;
- A mortgagee signing the sale and purchase agreement, or requesting the mortgagor to sign the sale and purchase agreement as already negotiated by the mortgagee;
- A mortgagee organising services related to selling the property, such as building, conveyancing, auctioning or advertising services;
- A mortgagee paying directly for the services related to selling the property;
- A mortgagor's solicitor also being the mortgagee's solicitor;
- A purchaser being associated with the mortgagee.
Submissions on the discussion document close on 18 December.
Rob Hosking is a Wellington-based freelance writer specialising in political, economic and IT related issues.
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