Watch out for the GST
hazard when auctioning commercial property
A deficiency in the standard NSW Contract for the Sale of
Land in treating GST payable on the sale of property by
auction has been exposed in the decision of SAMM Property
Holdings Pty Ltd v Shayne Properties Pty Ltd 
NSWSC 362, a decision of the Supreme Court of New South
Wales (Stevenson J) handed down on 4 April 2016.
The proceedings were brought to rectify the Contract so
that the purchase price of $3.325 million be treated as
plus GST (the vendor’s contention) as opposed to the
purchase price of $3.325 million being treated as
inclusive of GST (the purchaser’s contention).
At stake was whether or not the purchaser was required to
pay an additional $332,500 for GST.
The references in the Contract to GST
The Contract was for the sale of an industrial property
at Wetherill Park, Sydney. The property was offered with
vacant possession. The property was sold under the hammer at
There were two references to GST in the Contract, namely:
- On the front page, there was choice provided – “GST:
* yes in full ”.
The box crossed in this Contract was * yes in full”,
indicating that the GST was payable because it was a
Notes: if the ‘NO’ box is crossed, the reason why
it is not a taxable supply must be given, which for
commercial property is often that ‘the sale is the
supply of a going concern under section 38-325’, that
is, it is sold subject to lease.
- Printed clause 13.2 of the Contract reads:
“Normally, if a party must pay the price … to the other
party under this contract, GST is not to be added to the
Notes: printed clause 13 deals with GST issues
under the contract, referring in some detail to aspects
such as a supply of a going concern and the margin
scheme. But it does not refer to the situation where the
contract says the sale is a taxable supply in full but
there is no indication whether the price includes or
There was no additional clause inserted into this
Contract to override printed clause 13.2.
Auctioneer’s announcement concerning GST
The fact that the sale was by auction was the
complicating factor in this case.
If the property were sold by private treaty, then the
normal procedure is that the vendor’s solicitor ‘grosses up’
the price to include GST and then inserts the GST amount in
the box on the cover page which states “GST AMOUNT
(optional) The price includes GST of: ”.
The difficulty in following this procedure in an auction
situation is obvious – the price is set at the auction and
so the GST amount is not known in advance.
For this reason, experienced auctioneers will announce
that the bids accepted will not include GST, and that GST
will be added to the price when the contract is signed.
In this case, the auctioneer made an announcement, in his
standard form, as follows:
The sale today will be deemed a taxable supply
therefore GST will be payable, payable by you the
purchasers, your bids today are exclusive of GST and GST
will be in addition to the knockdown price of today’s
The court findings
The evidence given by the vendor was that if the highest
bid were accepted, it was to be plus GST, which was
consistent with the reserve price instruction being
expressed as + GST.
The crucial evidence given on behalf the vendor was given
by the auctioneer. He stated that he had read the
announcement. He had also sent a contemporaneous email to
confirm his recollection.
The evidence given on behalf of the purchaser was that
they understood the auctioneer’s announcement as not varying
the Contract, which indicated that the price included GST.
The court could not reconcile the differences between the
vendor and the purchaser recollections. And so the court
relied upon the auctioneer’s evidence in his email which was
that “No GST was added to this figure [$3.325 million] as
the sale was deemed to be a taxable supply and GST was to be
paid at settlement”.
Accordingly the court found that “the common intention of
the parties was that the sale price would be $3.325 million
plus GST” and ordered “the contract should be rectified
Would an additional clause clarify the GST liability?
The confusion which arose in this case could have been
avoided had a suitable additional clause been inserted into
the Contract to clarify the GST liability.
By paraphrasing the auctioneer’s announcement, could I
suggest an additional clause which for the standard NSW
Contract for the Sale of Land?
Insert after clause 13.11 of the printed clauses, a
new clause 13.12:
13.12 If this contract says that this sale is a
taxable supply in full, and the GST box is not
completed with a GST amount –
13.12.1 the purchaser must pay the vendor on
completion an amount of one-eleventh of the
price, in addition to the price; and
13.12.2 the vendor will give the purchaser a
tax invoice for the taxable supply.
The clause has been drafted to apply to all situations,
not only to sale by auction.