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When people buy units they don’t review the GST clause

In a recent Federal Court case a person purchased a unit for their own private use. They knew the price, they were happy with the price, they paid the price… and then a class action looked at situations where the GST in the contract was different to the actual GST that had to be paid by the seller.

In this case the contract said this was a taxable supply and the margin scheme applied, but it was actually not a taxable supply. SO the contract indicated GST would be payable by the seller, but this was never paid. The buyer (well the class action lawyers) argued this was misleading and deceptive and the GST should be paid to the buyer (with a whopping share going to the lawyers).

The Federal Court concluded that the contract was misleading, but the buyer would have bought the property for the price they did whether or not the GST clause was correct or misleading.

Importantly, the Court said when we buy things as GST unregistered people, we don’t make our decisions on whether to buy based on how much GST the seller is going to remit. Therefore, there was no loss here, even though the contract was wrong and misleading.

I am starting to get shocked at how sensible court decisions are getting these days…

By Ken Mansell

As a stay at home Dad most of the week this is my way of pretending I am still the tax counsel of ASX and SEC listed companies, working at big 4 firms, working at the Federal Treasury, on the Henry Review and at Parliament House for the previous government.

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