Developers could pay compensation after class actions from buyers allege GST was incorrectly charged

Belconnen Lakeview (a subsidiary of Hindmarsh Group) was found guilty of misleading and deceptive conduct after buyers of its Altitude Apartments complex lodged a class action last year.

The case alleged buyers had agreed to pay GST as a portion of the purchase price when the developers were not liable to pay the tax and had kept the windfall.

GST was not payable on the apartments as a legal loophole in taxation law meant residential premises were only considered to be "new" if it had never been sold before as a residential premises or were under a long-term lease.

All land in the ACT is leasehold and GST is only payable on new properties.

The loophole was the result of an obscure ruling in 2010 when the Federal Court found units constructed on land under a long-term lease were not considered "new residences".

This loophole was closed in 2012, but did apply to developments that were committed to before January 27, 2011.

A verdict on the class action by Altitude Apartment owners was delivered in December. While Belconnen Lakeview was found guilty of misleading and deceptive conduct it was not liable for compensation to all buyers.

But individuals were able to make further submissions for claims.

In a judgement on May 14, a woman who purchased an apartment at Altitude was awarded $29,914.50. This comprised of $23,379.50 plus interest of $6535.

Belconnen Lakeview had referenced a possible appeal, according to court documents.

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The class action was heard with another, which has a settlement pending court approval.

This related to Barton's Governor Place, which was developed by Barton Nine and 13.1 Barton (entities of the Morris Property Group and Doma Group). Governor Place has 171 apartments.

For this case, there is a proposed settlement for more than $2.5 million, subject to Federal Court approval. With legal and other fees taken out, this would amount to $715,000 to be distributed between owners.

The share of the funds would be based on the respective prices paid by each person for their apartment.

The settlement approval application will be heard by the Federal Court on June 3.

When the case was lodged last year, both developers denied the allegations.

Litigation funder IMF Bentham was behind the class action, and firm Corrs Chambers Westgarth represented the clients.

IMF Bentham and Corrs Chambers Westgarth had investigated the problem and in 2016 revealed it would mount class actions against developers they accused of incorrectly charging GST.