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Re: Invoice for failure to supply - GST or not?

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Newbie

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If we had a contract with a supplier to supply, for example, 500 tons of grain at $300 per ton but they only supplied 400 tons of grain.  The supplier has to pay us, for example, $50 a ton for the 100 tons difference between what they contracted to supply and what they actually supplied.  If we invoice that amount to them, should we apply GST to the invoice or not (both parties being GST registered)?

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ATO Certified

TaxTime Support

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Hi @RebLouHol,

 

Thanks for your question!

 

It sounds like what you've described may be an adjustment event, as it resulted in a change to the amount of the sale/purchase.

As long as it meets the criteria of a taxable sale, you should be able to charge GST on the invoice, and then report it on your BAS.

 

If you would like additional information about taxable sales, you should contact us.

 

Hope this helps,

 

Rachael B.

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Champion

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Hi @RebLouHol 

 

Interesting question, here's my thoughts:

Being that the money is still income to business A the expectation would be to charge GST - even if the payment is technically a "penalty".

As businesses in general aren't allowed to charge what constitutes a legal penalty (government based / fine), if the stipulation of the contract agreement is to pay X for failure to deliver then by all means you can charge X but it's still business income.

 

I could be wrong as the question is fairly specialised and there may be other rulings or information I'm missing, so wait and see if anyone else can validate or present other ideas.

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Best answer

ATO Certified

TaxTime Support

Replies 0

Hi @RebLouHol,

 

Thanks for your question!

 

It sounds like what you've described may be an adjustment event, as it resulted in a change to the amount of the sale/purchase.

As long as it meets the criteria of a taxable sale, you should be able to charge GST on the invoice, and then report it on your BAS.

 

If you would like additional information about taxable sales, you should contact us.

 

Hope this helps,

 

Rachael B.

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