GST in property transactions: who bears the risk?

How important is it to get the details right in the particulars of a contract of sale? In A & A Property Developers Pty Ltd v MCCA Asset Management Ltd [2016] VSC 653, the vendor learnt the answer to that question the hard way. One word cost them $290,000!

The vendor sold land to the purchaser for $2,900,000, with a deposit of $290,000. The particulars of the contract of sale stipulated that a balance of $2,610,000 was payable at settlement. The particulars also included a section stating “The price includes GST (if any) unless the words ‘plus GST’ appear in this box”. The relevant box included the letters ‘GST’ and nothing else.

The contract of sale was, in part, based on the standard form contract published by the Law Institute of Victoria and Real Estate Institute of Victoria Ltd. Clause 13 of the General Conditions provides:

“13.1 The purchaser does not have to pay the vendor any GST payable by the vendor in respect of a taxable supply made under this contract in addition to the price unless the particulars of sale specify that the price is ‘plus GST’.

13.2 The purchaser must pay to the vendor any GST payable by the vendor in respect of a taxable supply made under this contract in addition to the price if the particulars of sale specify the price is plus GST.” 

Around the time of settlement the parties discovered they had a difference of opinion on the question of who bore the GST liability. Indeed the purchaser thought the sale should not be subject to GST at all, as the property contained residential premises. However this issue – were the premises so uninhabitable as to not be “residential premises” - was ultimately not considered.

The vendor took the matter to court, seeking a declaration that the total price payable by the purchaser under the contract of sale was ‘plus GST’ (totalling $3,190,000), not ‘inclusive of GST’ (totalling $2,900,00). It contended that:

  • the contract was to be interpreted commercially and the presence of the letters ‘GST’ in the contract particulars indicated that the purchase price was ‘plus GST’;
  • alternatively, if the contract was ambiguous, the surrounding circumstances supported the vendor’s interpretation.

The purchaser countered, submitting that:

  • the language of clauses 13.1 and 13.2 was clear — namely, the purchaser was not required to pay GST in addition to the purchase price unless the contract particulars specified the price was ‘plus GST’. Absent the adoption of the mechanism provided by those clauses, the vendor was liable to pay any GST;
  • alternatively, if the Court determined that the contract was ambiguous, the surrounding circumstances did not establish that the parties intended the purchaser would pay GST on the purchase price.

The vendor was unsuccessful. Ginnane J found that the plain meaning of the contract was that the obligation to pay any GST lay with the vendor. The contract of sale provided a mechanism to oblige the purchaser to pay the vendor GST on the purchase price, but it was not used. The inclusion of the letters ‘GST’ in the box did not shift the burden of the payment of GST to the purchaser.

That conclusion raised the question: what did the letters ‘GST’ in the contract particulars mean? On this point, Ginnane J noted:

“… the words in commercial contracts are to be interpreted in accordance with their commercial purpose. While words should ordinarily be given some role to play in the operation of the contract, sometimes words are included or are left in the contract in error.

In the course of his Honour’s analysis, Ginnane J referred to Fitzgerald v Masters (1956) 95 CLR 420, where Dixon CJ and Fullagar J said: “[w]ords may generally be supplied, omitted or corrected, in an instrument, where it is clearly necessary in order to avoid absurdity or inconsistency”. Applying that principle to the case before him, Ginnane J held that “[t]here is no absurd result or inconsistency in the construction of the contract that I have adopted.

An alternative avenue open to the vendor, but not used, was to seek an order for rectification of the contract. However, Ginnane J indicated that such an order would not have been possible, as the evidence suggested the parties did not have a common intention about their agreement concerning liability to pay GST.

Finally, Ginnane J held that there was no ambiguity in the contract justifying reference to surrounding circumstances.

GST risk is not to be overlooked in the context of all taxable transactions, and this case confirms that the small details matter. For the vendor, the word ‘plus’ would have made all the difference.





Andrew Howe



Tim Neilson

Special Counsel


Alistair Haskett