ARTICLE · 09 MARCH 2010

Buyers creating GST Liabilities for Sellers – the Sunchen Case

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The decision in Sunchen Pty Ltd v Commissioner of Taxation was handed down in the Federal Court on 29 January 2010. This case is relevant to property sellers who may need to charge GST on the sale of their property - those sellers that are either registered for GST or required to be registered for GST.

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by Damian O'Connor, Partner

The decision in Sunchen Pty Ltd v Commissioner of Taxation was handed down in the Federal Court on 29 January 2010. This case is relevant to property sellers who may need to charge GST on the sale of their property - those sellers that are either registered for GST or required to be registered for GST.

In this case, Sunchen purchased a property at Port Macquarie. At the time of settlement, the property included a tenanted house.

Sunchen had plans to develop the property, but these plans were not at an advanced stage at the time, or soon after, the property was purchased. In the contract, Sunchen stated that it did not intend to change the use of the property - which, at the time, was predominantly for residential purposes. The contract further provided that if there was such a change of use by the purchaser, and this caused a GST liability for the vendor, the purchaser indemnified the vendor for the GST costs.

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