Lawyers are investigating a potential class action against ACT property developers after it was discovered that thousands of homebuyers may have been incorrectly charged GST on the purchase price.
Litigation funder IMF Bentham and Sydney law firm Corrs Chambers Westgarth have confirmed they are looking into cases in which several property developers charged ACT buyers GST-inclusive prices, despite contrary advice from the Australian Tax Office.
Buyers who purchased a new or off-the-plan residential unit in the ACT and settled in the last six years could be affected.
Tax laws relating to GST on new property developments changed in 2010. The Federal Court ruled that residential units built on land subject to a long-term lease were not considered new residences, and should be input taxed.
This legislative change affected all land in the ACT, which is leased from the Crown for 99 years.
From 2010, new units purchased directly from developers should not have been subject to GST, as the lease was previously held by the developer. However, a number of property developers are alleged to have continued to include GST in the purchase price, and may not have passed the funds to the Australian Tax Office.
If the class action goes ahead and is successful, property developers may have to foot a bill that runs into the millions.
While investigations are continuing, it is estimated that between 15 and 30 ACT residential developments could qualify for the class action. With the average new ACT unit selling for $400,000; the typical claim is expected to be around $40,000 in GST plus interest.
The developers identified as charging GST-inclusive prices have not been named, nor have the affected developments.
IMF Bentham says that homeowners may be eligible to join the class action if they meet all of the following requirements:
- They have purchased a new or off the plan residential unit in the Australian Capital Territory directly from a developer
- The purchase was settled in the last six years
- The contract stated that GST was included on that transaction.
The class action will only go ahead if there are enough people with a valid claim. If you think you might be eligible, check your contract and register your interest on the IMF Bentham website.