Paying GST for the Purchase of Commercial Property

  • Blog
  • Paying GST for the Purchase of Commercial Property
View All Articles

Scroll for more

Clients often come to me asking me to draft up or review their commercial property purchase or sale contract. The first thing they will tell me is the price, and the first question I ask is ‘plus or including GST?’

Whilst a lot of the time the GST Exemption for a Going Concern applies, it doesn’t always. Whilst the client might be saying, for example, that the price includes GST, sometimes to the other party has other ideas and it may not be enough to blindly rely on a mistake that is in your benefit.

The case of A & A Property Developers Pty Ltd v MCCA Asset Management Ltd2 (A & A Property Developers) illustrates a very important point; clear discussions and drafting is required to ensure both parties are on the same page when it comes to the payment of GST. This is particularly the case if you are buying off the plan, or using a contract that is not one of the easier to use standard form contracts such as in an REIQ or ADL template.

What happened?

In the case of A & A Property Developers Pty Ltd v MCCA Asset Management Ltd2 (A & A Property Developers) –

  1. The seller thought they were getting $2.9million + GST; and
  2. The Buyer thought they were paying $2.9million including GST.

A recipe for disaster!

This property was being sold in Victoria where the standard contract terms provided that the Seller paid GST out of the purchase price (ie. purchase price included GST) unless the box in the reference schedule beside the purchase price was completed with “plus GST”.

In this case the box was just completed with “GST”. So, it read “$2,900,000.00 GST”. The amount payable was ambiguous. The Court looked at the events leading up to the execution of the contract, the circumstances of the case and other external documents and emails to determine what the parties meant.

Clearly, the answer will be different depending on the parties and the circumstances. However, in this case, the Court (on appeal) found that the parties intended the purchase price to be exclusive of GST and the buyer was required to pay $2.9 million + GST.  Lucky for the Seller or otherwise 1/11th of the Purchase Price would have been coming out of their back pocket!

Take Home Message – Paying GST

Be clear! Talk about GST. Is the price we are negotiating ‘plus GST’ or ‘inclusive of GST’. If you intend for the Going Concern, farm land or another exemption to apply – talk to your lawyer and accountant before signing and ensure this is reflected!

If you are currently negotiating a contract to purchase or sell property in Queensland, we strongly recommend that you obtain financial and legal advice. Feel free to give us a call (1800 640 509) or contact our team today.

The information provided in this article is for general information and educative purposes in summary form on legal topics which is current at the time it is published. The content does not constitute legal advice or recommendations and should not be relied upon as such. Whilst every care has been taken in the preparation of this article, FC Lawyers cannot accept responsibility for any errors, including those caused by negligence, in the material. We make no representations, statements or warranties about the accuracy or completeness of the information and you should not rely on it. You are advised to make your own independent inquiries regarding the accuracy of any information provided on this website. FC Lawyers does not guarantee, and accepts no legal responsibility whatsoever arising from or in connection to the accuracy, reliability, currency, correctness or completeness of any material contained in this article. Links to third party websites or articles does not constitute any endorsement or approval of those sites or the owners of those sites. Nothing in this article should be construed as granting any licence or right for you to use that content. You should consult the third party’s terms and conditions of use in relation to any third-party content. FC Lawyers disclaims all responsibility and all liability (including liability for negligence) for all expenses, losses, damages and costs you might incur as a result of the information being inaccurate or incomplete in any way. Appropriate legal advice should always be obtained in actual situations.


Prefer to get in touch?

With offices in Brisbane, Sunshine Coast, North Queensland and Sydney, our team is well equipped to provide both advice and support across a broad range of legal areas.

Free call 1800 640 509
  • This field is for validation purposes and should be left unchanged.