Auctioneers must make it crystal clear to all bidders if bids are being taken on a GST-exclusive basis, the Australian Competition and Consumer Commission Chairman, Mr Graeme Samuel, has warned.
"Auctioneers and vendors who fail to ensure this may face significant consequences under the Trade Practices Act 1974", Mr Samuel said.
The ACCC has accepted court-enforceable undertakings from the Manningham Real Estate Pty Ltd, trading as Barry Plant Doherty, relating to the auctions of three allotments of residential land in Melbourne. The land was sold on behalf of the Manningham City Council.
In March 2004, the ACCC received several complaints about the advertising and auction of land in the Melbourne eastern suburb of Doncaster. The land was promoted in newspapers without showing whether the prices were inclusive or exclusive of the GST, and further, there was no clear disclosure to potential bidders prior to the auctions whether GST applied to the land sales. In one auction, the auctioneer made a representation that he did not believe GST was applicable when in fact there was GST liability on the hammer price.
The ACCC believes that the conduct of the real estate agent may have been in breach of sections 52 and 53A of the Trade Practices Act 1974, which prohibits misleading conduct and false representations being made in relation to the sale of land.
The real estate agent has acknowledged that the action may have raised implications under the Act and offered a court-enforceable undertaking to ensure that future property advertising and conduct of auctions comply with the Act.
As a consequence of cooperation by the auctioneer and council, the buyers will receive a full refund totalling $48,350 of the GST paid. The ACCC believes the Council had not been involved in any alleged contravention of the Act.
"Under the ACCC's GST pricing guidelines, auctioneers have some flexibility as to whether they conduct auctions on either a GST-inclusive or exclusive basis", Mr Samuel said. "However, it is crucial that when conducting an auction, auctioneers make it crystal clear at the commencement of the auction that price bids are being taken on either a GST-inclusive or GST-exclusive so that consumers can make informed decisions as to the total price that they will have to pay. Auctioneers which fail to make this clear may be required to make good the consumers' loss".