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Do I need pay GST on Compensation Received from supplier?

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Hello,

We received $4000 from our supplier as compensation because of damage on products. 

 

Do we need pay GST on this compensation we received?

 

Thx

 

Sharon

 

 

1 ACCEPTED SOLUTION

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ATO Certified Response

ATO Community Support

Replies 1

Hi @Sharon198021,

 

Generally speaking, GST is payable on the provision of goods or services provided in Australia, unless they explicitly listed as GST-free or input-taxed sales.

 

The compensation payment you've received wouldn't fit the classification of providing goods or services, therefore GST would not apply.

 

If the products are considered an underlying asset for your business, then the compensation payment may have Capital Gains Tax (CGT) implications that need to be declared on your business income tax return. More information regarding CGT on compensation payments and the relevant taxation ruling can be found in the link below.

 

ATO Website- GST-free sales

ATO Website- Input-taxed sales

ATO Website- CGT and compensation

 

RachATO

2 REPLIES 2

Most helpful response

ATO Certified Response

ATO Community Support

Replies 1

Hi @Sharon198021,

 

Generally speaking, GST is payable on the provision of goods or services provided in Australia, unless they explicitly listed as GST-free or input-taxed sales.

 

The compensation payment you've received wouldn't fit the classification of providing goods or services, therefore GST would not apply.

 

If the products are considered an underlying asset for your business, then the compensation payment may have Capital Gains Tax (CGT) implications that need to be declared on your business income tax return. More information regarding CGT on compensation payments and the relevant taxation ruling can be found in the link below.

 

ATO Website- GST-free sales

ATO Website- Input-taxed sales

ATO Website- CGT and compensation

 

RachATO

Initiate

Replies 0

Thank you for your reply, Rach. 

 

It's clearly sorted my quesiton.  

 

Sharon