Home – New Forums Money matters Referrals – What do I classify them as?

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  • #988079
    Travis Knight
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    Hi Everyone,

    I have been thinking about offering referral rewards for my business.

    e.g. John Smith tells Jane Doe that they should come to me. John Smith then gets rewarded X amount for the referral. This money could be rewarded to businesses or individuals.

    How would this be accounted for?

    Thank you all for your help in advance.

    #1165529
    Anonymous
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    Hi Travis,

    I’ll leave it to some of our resident bookkeeping and accounting experts to help you with this question, but in the meantime, welcome to Flying Solo!

    All the best,
    Jayne

    #1165530
    Luth6322
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    Your essentially paying a commission for the referral, so I would say its an ordinary business expense.

    Cheers

    Carrie

    #1165531
    FalzonFinancial
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    Further, for each referral the implications of GST should be taken into account. For these fees paid to the businesses, there may be an input tax credit you may be entitlement to. In this scenario the business should provide a tax invoice, depending on the amount of the fee.

    For payments made to individuals there generally will be no implications for GST.

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