Last week the Victorian Supreme Court handed down its decision in Duoedge Pty Ltd v Leong & Anor [2013] VSC 36 which illustrates the continued difficulties (and disputes) with regards to GST and real property transactions. In this case the contract was stated to be inclusive of GST and upon discovering that GST was not payable by the vendor, the purchaser sought a refund of 1/11th of the purchase price. The Magistrates Court agreed with the purchaser, finding that it was an implied term of the contract that the vendor would refund the GST amount if GST did not apply to the sale and that the contract should be rectified accordingly.

The Supreme Court allowed the vendor’s appeal, finding that:

• There was no term to be implied into the contract that the vendor would refund the GST amount. In coming to this finding the Court found it relevant that because the sale was not a taxable supply, the purchaser (being a developer) was able to utilise the provisions of the margin scheme with respect to the developed units.
• There were no grounds for rectification of the contract because there was no common intention or common mistake recorded incorrectly in the written contract.

My analysis of this decision (including references to other decisions where parties have disputed the GST position in real estate contracts) can be accessed here.