Commission, tax and what it all means - Page Properties
COMMISSION, TAX AND WHAT IT ALL MEANS…
In the last few weeks, all Registered Estate Agents received a directive from our governing body, the Estate Agents Council, instructing us on when we could receive commission and when commission is deemed to have been earned.
Their ruling is that commission is due when a sale has been completed between a willing buyer and a willing seller. The key words here are “completed” and “willing”. We have been instructed that commission cannot be paid before a sale is complete, in other words before the property has been transferred into the new owner’s name. We cannot charge commission when a sale falls through, as so many agents try to do. If the sale falls through either the buyer or the seller is no longer ”willing”, and therefore the agent has not earned the commission.
The commission is paid by the Seller and not by the Purchaser. It is in direct contravention of the Estate Agents Act to receive payment from both the buyer and the seller for the same property transaction. This double charging (albeit at different rates) is becoming more and more common, with some agents charging up to $350 for an “agreement fee” payable by the Purchaser (which is non refundable!), and then charging the Seller 5% of the Purchase Price as commission.
Please be aware of these unscrupulous agents who prey on the ill-informed public. You do not have to pay an agreement fee, nor should you pay any form of commission if you are a buyer or a tenant. The commission paid to the agent is payable by the owner of the property, that is the Seller or Landlord.
Capital Gains Tax, property tax and the impending income tax are another area of concern for many of my clients.
Property tax is the 5% tax charged on any property purchased prior to the February 2009 dollarisation.
Capital Gains Tax is the tax charged (20%) on the difference between the price you paid for your property (post February 2009) and the price you are selling it on for now. There are several deductions which can be made, including improvements, fees and a yearly appreciation allowance, but this is another topic entirely.
It is predicted that this tax will change in the new budget expected out in November 2013, where Capital Gains Tax will be shelved and Income Tax at a rate of 25% will be charged on the sale of immovable property. This is still speculation at this point, but something to keep in mind if you are planning on selling your home in the near future.
If you are planning on selling, I would advice doing it sooner rather than later in the year to avoid the 25% charge.