GST on new apartments - Hindmarsh Group

An interesting class action has been brought against the Hindmarsh Group for having charged OTP buyers in Canberra GST on their purchases.

It makes you wonder, how this got past every purchaser's solicitor? So you get what you pay for with your conveyance? Are they the ones who should be reviewing the efficacy of your contract regarding the financial aspects?

What would have led Hindmarsh to get a private ruling on the issue & will it hold up if it goes against the GST act 2000?

Having collected the gst, has the developer still claimed the input credits or have they double dipped?

@Terry_w @KateAshmor @thatbum @Paul@PFI

 

Most lawyers would advise a client to see their 'accounant' for tax advice. This limits their liability and tax is not something the average lawyer does. Conveyancers just cannot advise on this at all.

Even if the lawyer gave tax advice these appear to be brand new properties and are subject to GST on face value. It would not be known if the vendor had lied on the contract.

 

This seems something far less a GST issue and more a potential mistake / fraudulent position. Question is was the Commonwealth or the client defrauded ? Its possible the Commonwealth will seek its tax that the developer collected AND the clients could sue as well... The GST laws contain rules that can force those who collect GST in error to hand it over. A few cases came up a few years back as well as a older Qantas case....You cant keep GST you benefit from and must remit it !! (Qantas argued it could keep the proceeds....ATO says it become a taxable supply at the time of the otherwise exempt supply.)

The final para of that article is something I want to look into..Alarm bells !! ..That is something I have never seen.

This year’s federal budget laid out that as of mid-2018, GST on new homes will be collected directly from home-buyers and not from developers

 

Yeah - seems it wasnt mentioned in budget papers the way it has been revealed later.

Issue is this
Property industry caught off guard in 'quantum change' to GST

So what it does it imposes the timing and responsibility for GST for new property to be witheld by the purchaser at settlement and their lawyer would become responsible for remitting the developer GST to the ATO.

I believe that this means the onus for failure to remit GST then hurts the BUYER rather than the seller...Silly really but I get it.

Nice to see the draft laws and the proposed process for this one. It could be very simple or become a nightmare and a extra cost to the buyer AND vendor. eg I may expect buyer solicitor will seek a tax invoice from the seller that states the GST. They need this as if the margin scheme is used only the developer knows that amount. Tax invoice is the likely process. At settlement those proceeds will be credited to ATO and not given to the developer. Developer does BAS and gets a credit somehow....If all is correct A = B. Developer onus is on getting that tax invoice correct

 

I would have thought the buyer pays the going rate and if they don't like it, goes elsewhere. So if GST included in list price it's up to the developer to remit and buyer doesn't care.

 

The whole case seems strange.

1. Usually the purchase price for a residential sale is expressed as GST inclusive and does not expressly state whether the sale is a taxable supply.
2. The settlement statement would not usually include a line item for GST.
3. Buyers would not normally receive a tax invoice at settlement.
4. The supply of new residential premises would be a taxable supply and not input taxed.

 

Not always.

1. Supplier not registered and buyer fails to check
2. Supplier uses margin scheme
3. Supplier says use margin scheme but fails to

IMO seller must be compelled by tax law tol give tax invoice or witholding occurs. Thats not the law