Understanding the Nominee Clause in South Australia Property Contracts: A Guide for Buyers

Plain English Definition

"Nominee Clause" refers to a provision in a South Australia property contract that allows the person named as the purchaser to nominate another person, company, or trust to take legal ownership of the property at settlement. In the standard REISA Contract, while the right to nominate is often implied or added as a special condition, the original purchaser remains legally responsible for ensuring the contract is completed.

The Danger Zone: Buyer's Risk

• Double Stamp Duty: Under the Stamp Duties Act 1923 (SA), if a nomination is not executed correctly—such as if the nominee is not "related" to the purchaser or if there is a "sub-sale" arrangement—RevenueSA may charge stamp duty twice: once on the original contract and once on the nomination.
• Continuing Liability: In a standard REISA Contract, the original purchaser is not "off the hook" after nominating; if the new nominee fails to settle or pay the balance, the vendor can legally sue the original purchaser for the full purchase price and damages.
• Finance Withdrawal: Many South Australian lenders will refuse to provide a mortgage if the entity on the loan approval (e.g., an individual) does not match the entity on the transfer (e.g., a company or trust), potentially causing the buyer to default on the contract.
• Strict Notice Requirements: Vendors in South Australia may require a formal "Notice of Nomination" to be served within a specific timeframe; failing to provide this in writing can result in the vendor refusing to recognize the nominee, forcing the original buyer to settle in their own name or lose their deposit.
• Land Tax Surcharges: For Chinese-Australian investors, nominating a foreign-owned company or a discretionary trust as the buyer can trigger the South Australian land tax surcharge, significantly increasing the annual holding costs of the property.
• Vendor Refusal: Unless the contract specifically includes the words "and/or nominee" or a dedicated nominee clause, a vendor in South Australia is not legally obligated to accept a nomination, which can trap a buyer in an unsuitable purchasing entity.

Real-Life South Australia Scenario

Wei, an investor from Prospect, signed a REISA Contract to buy a townhouse in his own name but later decided to nominate his family trust to hold the asset for tax purposes. Because Wei's accountant had not finished setting up the trust deed until after the contract was signed, RevenueSA deemed the nomination a "sub-sale," resulting in a second bill for stamp duty totaling over $22,000. Wei was forced to pay this unexpected tax out of his renovation budget because his bank would not increase his loan to cover the penalty. Lesson: Always ensure your purchasing entity is legally established and the nomination is executed correctly under South Australian law before the "cooling-off" period ends to avoid double taxation.