Understanding Settlement Adjustments
New South Wales
At settlement, certain costs are divided fairly between buyer and seller based on who owns the property for each portion of a billing period.
Many property-related charges like council rates and water are billed quarterly or annually. When you buy a property, settlement rarely falls exactly at the start or end of a billing period.
Adjustments ensure each party pays only for the time they own the property. This means you might receive money from the seller (a credit) or pay money to the seller (a debit) depending on whether bills have already been paid.
When the seller hasn't paid a bill yet, they give you money at settlement to cover their share. You'll pay the full bill later.
When the seller has already paid a bill in advance, you reimburse them for your share of the period you'll own the property.
Quarterly Billing
Most councils bill rates quarterly (every 3 months). Some councils offer annual payment options with discounts. The billing cycle varies by council.
How It Works
Seller Has Already Paid
Council rates of $2,000 were paid for the quarter (1 July to 30 September). Settlement occurs on 15 August.
CALCULATION
- Quarter period: 92 days
- Days seller owned: 46 days (1 July - 15 August)
- Days buyer will own: 46 days (15 August - 30 September)
- Buyer's share: $2,000 × (46 ÷ 92) = $1,000
Buyer pays seller $1,000 at settlement
Seller Has Not Paid Yet
Council rates of $2,000 are due for the quarter but unpaid. Settlement occurs on 15 August.
CALCULATION
- Quarter period: 92 days
- Days seller owned: 46 days (1 July - 15 August)
- Seller's share: $2,000 × (46 ÷ 92) = $1,000
Seller credits buyer $1,000 at settlement (buyer will pay the full bill when it arrives)
Two Components
Water bills typically have two parts: a fixed access charge (quarterly) and a consumption charge (based on meter readings). Both are adjusted at settlement.
Common Scenarios
Water Paid in Advance
Water access charge of $300 was paid for the quarter. Settlement is halfway through.
CALCULATION
- Seller paid: $300 for full quarter
- Buyer's share: $150 (half the quarter)
Buyer reimburses seller $150 at settlement
Water Consumption Estimate
Water meter reading shows estimated consumption since last bill. No reading at settlement.
CALCULATION
- Estimated daily usage based on historical data
- Days of seller's occupancy calculated
- Estimated consumption charge for seller's period
Seller credits buyer for estimated consumption (buyer pays final bill)
Body Corporate/Strata Levies
For units and townhouses, body corporate levies are usually paid quarterly. These are adjusted the same way as council rates.
Land Tax
If the property attracts land tax (investment properties), this annual charge is adjusted based on the settlement date.
Rent (If Tenanted)
For investment properties with tenants, rent is adjusted so you receive income from settlement day onwards.
- 1
Adjustments are fair - they ensure each party pays only for the time they own the property.
- 2
Credits reduce your settlement amount - money comes off what you need to pay.
- 3
Debits increase your settlement amount - you're reimbursing the seller for prepaid bills.
- 4
Your solicitor handles the calculations - we prepare the settlement statement showing all adjustments.
Have questions about your settlement statement? Contact our team and we'll explain each line item.