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GST is this claiming twice?

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Newbie

Views 801

Replies 8

I'm registered for GST. I have a cleaning and linen hire business.

I order linen from ABC Linen Company for myself and another business (not associated with me), this business is a real estate agency, they manage holiday rentals.  I clean the holiday rentals and make the beds with the linen (they use to supply the linen, now I'm ordering it from my supplier). I send the real estate an invoice for each clean.  The cleaning invoice part is fine & straightforward, it's the GST on the linen I'm not sure about.  I don't know if I should add GST on top of  the ABC Linen Company invoice amounts when I invoice the real estate agent for the linen or do I only invoice for the exact amount the ABC Linen Company invoiced me for?  Would that be two companies claiming the same GST? Would that mean that I had claimed the GST on the ABC Linen Company invoice and then the real estate would do as well? I'm a bit confused and not sure what to do. Your help would be greatly appreciated.

 

1 ACCEPTED SOLUTION

Accepted Solutions
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Best answer

Devotee

Replies 0

If the estate agency hired the linen directly from ABC, they would pay $110 (GST included).  ABC would pay $10 in GST and the agency would claim a $10 GST credit. 

 

If you hire the linen from ABC for $110 (GST included) and then charge the same amount to the agency, ABC would pay $10 in GST, you would claim a $10 credit when you pay ABC and incur a $10 GST liability when you provide the linen to the agency who would claim a $10 GST credit.  Overall ABC pays $10, your pay nothing as your two transactions cancel each other out and the agency claims a $10 credit.

 

You can see that each of these options gives the same GST outcome, so there is not really any double claiming.

 

This should be easy for you to administer as you simply need to claim the total credit for the GST listed on the invoice from ABC and apply GST to the total amount that you invoice the agency for.  If you were to do it another way you would need to separately treat different amounts on each of the invoices.

 

 

8 REPLIES 8
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Taxicorn

Replies 3

@LeeBee14 

 

Yes, you charge GST on top of what you paid.

 

See the flow-chart here

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Newbie

Replies 2

Thanks for your reply.

I'm still a bit confused.

If I paid $110 including GST for the linen and then I invoice the real estate, do I  invoice them for $121 including GST?

If so, wouldn't that mean the real estate would be better off buying direct from the linen company as they would only pay $110 including GST?

Is that correct?

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Taxicorn

Replies 1

@LeeBee14 

 

Correct and Correct.

 

You are providing a service.

 

If they want to save money they should buy it direct.

 

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Newbie

Replies 0

Ok then, that's what I thought in the first place but the real estate said I'm wrong. They don't understand the GST implications & they said they don't want an invoice from me with GST added.
Thank you for your help, much appreciated.
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Devotee

Replies 3

If you pay $110 for the linen, you will claim a $10 GST credit.  This means it has cost you a net amount of $100.  When you bill the agent, you charge them $110 including GST.

 

Overall, ABC linen pays $10 GST at the time they hire it to you.  You claim a $10 credit when you acquire the linen, but pay $10 GST when you invoice the agent (your net result is nil GST) and the agent claims a $10 credit.  So overall there is no double claiming and no need to charge $121 unless you want to make a profit on the hiring.

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Taxicorn

Replies 2

@Glenn4802 

 

Not sure why you wouldn't want to make a profit if you are in business?

 

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Newbie

Replies 1

Ok, so that's two different answers from two different people.

If I purchase the linen for $110 including GST and charge the real estate $110 including GST aren't we both claiming the same GST?

The reason why I can't make any money from the linen is that the real estate was ordering the linen themselves and it was delivered to their office. Either myself or one of my staff would then have to drive half an hour there and half an hour back to get the linen, so that was costing me money.  The real estate thought it was easier if I ordered the linen on my account and have it delivered to my office and then I would invoice the real estate agent.  

It seems to be a bit complicated doing it that way. I'll think of another way.

Thanks for your reply.

Highlighted

Best answer

Devotee

Replies 0

If the estate agency hired the linen directly from ABC, they would pay $110 (GST included).  ABC would pay $10 in GST and the agency would claim a $10 GST credit. 

 

If you hire the linen from ABC for $110 (GST included) and then charge the same amount to the agency, ABC would pay $10 in GST, you would claim a $10 credit when you pay ABC and incur a $10 GST liability when you provide the linen to the agency who would claim a $10 GST credit.  Overall ABC pays $10, your pay nothing as your two transactions cancel each other out and the agency claims a $10 credit.

 

You can see that each of these options gives the same GST outcome, so there is not really any double claiming.

 

This should be easy for you to administer as you simply need to claim the total credit for the GST listed on the invoice from ABC and apply GST to the total amount that you invoice the agency for.  If you were to do it another way you would need to separately treat different amounts on each of the invoices.