Home Forums Money matters How to charge for non GST registered labour

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  • #999751
    Bluechips1967
    Member
    • Total posts: 5

    Hi all,

    I’m having difficulty understanding how to charge for non GST labour on a Tax Invoice as a GST registered business. I’ve trawled ATO and don’t understand.

    Example:
    A contractor provides an invoice (not a Tax Invoice) for $600, as he is not registered for GST.

    A Tax invoice is raised for

    Materials: $100 inc. GST
    Labour: $500 inc. GST
    Contractor Labour: $600

    Am I required to charge GST on this amount on a Tax Invoice?

    Thanks for your input

    #1221223
    Paul – FS Concierge
    Moderator
    • Total posts: 3,127

    Hi And Welcome to Flying Solo [USER=115803]@Bluechips1967[/USER] . It is great to have you!

    Thank you for joining our community and posting.

    Hopefully some helpful members will be along soon with some advice to point you in the right direction.

    Cheers

    #1221224
    Bluechips1967
    Member
    • Total posts: 5
    Paul – FS Concierge, post: 267152, member: 78928 wrote:
    Hi And Welcome to Flying Solo [USER=115803]@Bluechips1967[/USER] . It is great to have you!

    Thank you for joining our community and posting.

    Hopefully some helpful members will be along soon with some advice to point you in the right direction.

    Cheers

    Thanks Paul

    #1221225
    Rowan@quaotic
    Participant
    • Total posts: 712

    Yes, I think that if you are invoicing a customer then you are required to add GST for that labour even though you did not pay it on the labour, just as if you made something out of nothing then sold it to a customer – ie, if you picked up a stick off the ground and then sold it to a customer you would still charge GST on it.
    Not sure I explained it properly but I hope you get the gist. I am not a tax professional though.

    #1221226
    beaglebookkeeping
    Member
    • Total posts: 9
    Bluechips1967, post: 267150, member: 115803 wrote:
    Hi all,

    I’m having difficulty understanding how to charge for non GST labour on a Tax Invoice as a GST registered business. I’ve trawled ATO and don’t understand.

    Example:
    A contractor provides an invoice (not a Tax Invoice) for $600, as he is not registered for GST.

    A Tax invoice is raised for

    Materials: $100 inc. GST
    Labour: $500 inc. GST
    Contractor Labour: $600

    Am I required to charge GST on this amount on a Tax Invoice?

    Thanks for your input

    Yes, if you are registered for GST then you need to add GST onto whatever you are charging in your Tax Invoices regardless of whether you had to pay GST on it yourself.

    I hope this helps.

    #1221227
    Paul – FS Concierge
    Moderator
    • Total posts: 3,127

    Just out of practicality, I always think in terms of an ex-GST price.

    I overwhelmingly deal with commercial transactions, so for the most part, the GST is not a factor for my business or those I deal with.

    So a $100.00 item that includes GST, costs my bottom line $90.90 – it is therefore “more accurate” for me to think of the item as costing $90.90 than thinking of it as costing $100 including GST.

    To your example above, I would think of it like this:

    Materials: $90.90 + GST
    Labour: $454.54 + GST
    Contractor Labour: $600 + GST

    Edited to correct Contracted Labour mistake.

    Cheers.

    #1221228
    Bluechips1967
    Member
    • Total posts: 5
    beaglebookkeeping, post: 267157, member: 51317 wrote:
    Yes, if you are registered for GST then you need to add GST onto whatever you are charging in your Tax Invoices regardless of whether you had to pay GST on it yourself.

    I hope this helps.

    Thank you. I thought this may be the case. I appreciate your feedback.

    #1221229
    Bluechips1967
    Member
    • Total posts: 5
    Paul – FS Concierge, post: 267160, member: 78928 wrote:
    Just out of practicality, I always think in terms of an ex-GST price.

    I overwhelmingly deal with commercial transactions, so for the most part, the GST is not a factor for my business or those I deal with.

    So a $100.00 item that includes GST, costs my bottom line $90.90 – it is therefore “more accurate” for me to think of the item as costing $90.90 than thinking of it as costing $100 including GST.

    To your example above, I would think of it like this:

    Materials: $90.90 + GST
    Labour: $454.54 + GST
    Contractor Labour: $545.45 + GST

    Cheers.

    Thanks Paul

    #1221230
    Bluechips1967
    Member
    • Total posts: 5
    Rowan@quaotic, post: 267156, member: 28171 wrote:
    Yes, I think that if you are invoicing a customer then you are required to add GST for that labour even though you did not pay it on the labour, just as if you made something out of nothing then sold it to a customer – ie, if you picked up a stick off the ground and then sold it to a customer you would still charge GST on it.
    Not sure I explained it properly but I hope you get the gist. I am not a tax professional though.

    Thanks Rowan

    #1221231
    Paul – FS Concierge
    Moderator
    • Total posts: 3,127
    Bluechips1967, post: 267163, member: 115803 wrote:
    Thanks Paul
    I made a mistake and have made an edit to correct.

    Using your example, this is how I calculate your numbers.

    To your example above, I would think of it like this:

    Materials: $90.90 + GST
    Labour: $454.54 + GST
    Contractor Labour: $600 + GST

    #1221232
    JamesMillar
    Participant
    • Total posts: 1,676

    The best default position would be for you to charge GST on your entire service as generally speaking you are making a taxable supply and liable for 1/11th of all proceeds. This avoids you being out of pocket.

    However…….there is another occasional way to treat this and it relates to the concept of agency. Generally this is around more obvious disbursements and it comes down to the transaction structure and terms and conditions. For example you can arrange a third party to supply your customer and you can collect funds on behalf of the third party. The supply is not being made by you because of the agency relationship and therefore this transaction and GST does not relate to you.

    Note the use of agency in GST is less common and requires careful consideration of transaction structure and agreements.

    BUT

    It can be very important if you are approaching a particular tax threshold (lets say you were close to exceeding the $2m small business entity threshold) because you may be able to legally recast transactions to keep your revenue lower and keep access to all of the tax benefits associated with being a tax SBE.

    Some light reading here https://www.ato.gov.au/law/view/document?DocID=GST/GSTR200037/NAT/ATO/00001#targetText=GST payable and input tax,GST payable on the supplies.

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