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GST on contractor expense reimbursement

Newbie

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Hello. Just after some help with the below scenario. 

The department I work for engages a contractor for professional services. As part of the arrangement we agree to pay all travel expenses for the contractor. Flights, Accomodatiom and car hire are booked by us (the client) for the contractor and we agree to reimburse the contractor for any additional incidentals incurred during the travel (i.e. food, petrol for hire car, parking at hotel and the like). So getting to my question. With the contractors invoice to us (the client) for the reimbursement of expenses, how should this look GST wise? If for example, there was a $44 petrol expense, does the client invoice us $40, plus $4gst or $44 (GST free/exempt?)

The client is registered for GST. Thanks!

 

 

 

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ATO Community Support

Replies 2

Hiya @JasmineOsborne,

 

The contractor is required to add GST on top of any amount they invoice to you. So if they spend $44 on fuel and invoice that to you, they are required to charge you $48.40 GST inclusive.

 

Unless the original transaction is GST free, in which case, GST wouldn't apply to that line on the invoice.

3 REPLIES 3

Most helpful response

ATO Community Support

Replies 2

Hiya @JasmineOsborne,

 

The contractor is required to add GST on top of any amount they invoice to you. So if they spend $44 on fuel and invoice that to you, they are required to charge you $48.40 GST inclusive.

 

Unless the original transaction is GST free, in which case, GST wouldn't apply to that line on the invoice.

Newbie

Replies 1

Hi Steph, 

 

Thanks for your reply. Can I just ask for a bit more clarity. So, if the $44 petrol expense already included $4 of GST, why would the contractor then be adding GST again (to $48.40)? Wouldn't they then be receiving more than the $44 expense they incurred? (Sorry, just trying to understand the entire transaction). Thanks! 

ATO Community Support

Replies 0

Hi @JasmineOsborne

 

If they paid $44.00 inclusive of GST for an expense they can invoice you $40.00 plus $4.00 GST or $44.00 plus $4.40 GST.

 

The amount would be a matter for you and the contractor to sort out.

 

If they're required to invoice you for reimbursement then they must charge GST since they're registered.