Danny Schwartz, a long-time property developer, was recently speaking to a developer friend. The friend had complained it was difficult to come up with the cash for the GST on property deals.

The conversation gave Schwartz an idea: a niche product that would do one simple thing, fund the GST component of property transactions.

“I thought this was an opportunity,” said Schwartz, “so I asked my lawyers if they thought it was a viable proposition, and they said they’d like to partner with me.” Surefire, the financial advisory arm of law firm Marshalls and Dent, are partnering Schwartz in the business.

GST WeFund is also fortunate to have the counsel of leading GST expert, Ken Fehily, who co-wrote Australia’s GST legislation.

“Fehily knows the area better than anyone in Australia,” said Schwartz. “Having him on our side gives comfort to both our borrowers and our lenders. He can shepherd each deal through with confidence.”

Schwartz believes GST WeFund, once up and running, could fund thousands of transactions a week. “We believe the market is quite big for this little product,” he said.

GST WeFund is happy to work with first-time investors, all the way through to experienced property developers.

With banks now lending up to only 60% of value, being able to hold onto 10% cash at settlement can make a significant difference to deals, says Schwartz. “That extra 10% is substantial,” he said. “If you buy a property for $3 million you have to pay $300,000 cash. It’s a lot of money. And it’s going to be coming back to you anyway. It’s just a timing issue.”

“Developers generally are not debt shy, so this also provides an opportunity for them to take on a bit more debt,” said Schwartz.

GST WeFund prefers to deal with ‘cleanskin’ companies, or companies that have been set up solely for the purpose of buying the property. These entities have no tax history. Companies with a tax history could have tax owing, which could then be deducted from the eventual GST refund.

“Most people buy in new entities, and that’s better for us too because you don’t have a tax issue,” said Schwartz.

The application process is straightforward. Interested parties can contact the GST WeFund office directly or fill in the online application form.

Once contacted, GST WeFund will look at the property, work out if the GST is fundable, and calculate the GST due. The company can lend up to any amount.

GST WeFund will attend the property settlement and provide the GST funds then. Once the purchaser has lodged their BAS statement, the Australian Tax Office will refund the GST back to GST WeFund.

Schwartz believes there is little risk in the venture. “Some say it’s actually sovereign risk because we’re dealing with the government,” he said. “As long as we are comfortable that the entity that is borrowing doesn’t have a tax history or it has no tax owing, we will be comfortable in loaning the funds.”

The idea is not completely new, says Schwartz. GST loans are offered by some finance companies as part and parcel of their loaning facilities. “But there’s no one who has created a bespoke GST funding company before,” he said.

With banks increasingly risk averse, Schwartz says the large banks are comfortable with niche operators filling gaps in the lending market. “They’re pleased we are coming into the marketplace because we have a bespoke, boutique product,” he said.

GST WeFund will go live on 1 July after a period of product and system testing. “We’ve done a number of deals already to test the market place,” said Schwartz.

“We have an information portal on the website, with information about what we do, how we do it, what the processes are, and if you’re interested you can give us a call,” said Schwartz.

“I think it’ll be a real service for all people who invest in property,” he said.

For more information, contact Mark Wollan (+61 3 9604 4082) or visit the website www.gstwefund.com.au.