Delayed Property Settlements: Step-by-Step

Sellers buying new homes often use expensive bridging loans to cover timing gaps. A delayed settlement aligns your sale and purchase dates perfectly, avoiding high interest rates and fees.

Under Centrelink guidelines, if you sell your principal home, the proceeds intended to buy or build a new home are exempt from the assets test for up to 12 months from settlement, or longer in special cases. Having a delayed settlement written into the contract secures your purchase timeline while protecting your pension concessions, preventing any disruption to your regular income.

During an extended settlement period, the buyer's deposit remains held securely in the vendor's solicitor's trust account. However, if the seller requires funds to pay a deposit on their next property or cover stamp duty, they can request the early release of the deposit under Section 27 of the Conveyancing Act 1919 (NSW).

This requires the buyer's consent and is subject to proving that the property has sufficient equity to cover any outstanding mortgages.

Additionally, the vendor remains responsible for maintaining the property and paying council and water rates up until settlement day. Adjustments are calculated by conveyancers on the morning of settlement to ensure all bills are shared proportionally.

Sellers must note that for tax purposes, the Australian Taxation Office (ATO) triggers Capital Gains Tax (CGT) liabilities on the date of contract exchange, not the settlement date. If you exchange contracts in June but settle in September, the transaction falls within the financial year of the exchange.

Registered tax accountants should be consulted to ensure that delayed settlements are timed strategically to minimize tax liabilities, especially if crossing financial years.

For retirees, selling the primary residence triggers Centrelink review. Under the Social Security Act 1991 (Cth), the proceeds from the sale of your primary home are exempt from the assets test for up to 12 months (extendable to 24 months if delayed by construction factors) if you intend to use the funds to purchase, build, or renovate a new home.

This exemption is crucial to preserving your Age Pension entitlements. Aligning your contract exchange and delayed settlement dates ensures you comply with these Centrelink reporting windows, protecting your capital from premature asset inclusion.

Because the seller retains occupancy during a delayed settlement, they must maintain the property in its condition as at the date of contract exchange, fair wear and tear excepted. The risk of damage remains with the vendor until settlement or possession.

Sellers must continue to hold building insurance policies active throughout the extended completion window, ensuring that any accidental damage is fully covered prior to the electronic transfer on PEXA, keeping both parties protected.

To execute a long settlement safely, follow these steps with your legal representative: 1. g. for valuations or building reports) during the delayed period.

2. Require a Substantial Deposit: Do not accept a nominal deposit. Demand a full 10% deposit to ensure the buyer remains committed.

3. Discharge of Mortgages: Contact your lender early to notify them of the delayed settlement timeline. Provide a copy of the contract so they can compute interest charges and prepare the discharge documents.

4. Plan Pre-Settlement Inspections: The buyer is entitled to conduct a final inspection of the property in the 3 days prior to the scheduled settlement. Maintain the property clean and functional.

Executing a flexible or long settlement requires coordinating with your outgoing mortgagee bank. Lenders require a completed Discharge of Mortgage authority form to calculate the exact payoff figure for settlement day. This process typically takes 10 to 15 business days.

Once processed, the lender registers their participation in the electronic PEXA workspace. At settlement, the PEXA system automatically directs the necessary portion of the purchase funds to pay off the mortgage, releasing the bank's charge on the title.

Any surplus equity is instantly wired to the vendor's nominated accounts in real time. Because title transfer and debt discharge occur simultaneously online, manual bank cheque processing delays are eliminated, ensuring transaction security.