2.5 If a builder incurs costs related to taxes and charges that are GST-free under the Treasurer's Division 81 Determination; and invoices a client separately for those costs, is the builder liable for GST?

For source of ATO view, refer to:

• the general principles in GSTR 2000/37 Goods and services tax: agency relationships and the application of the law
• paragraphs 8 and 9 of GSTD 2000/10 Goods and services tax: are outgoings payable by a tenant under a commercial property lease part of the consideration for the supply of the premises?

ATO position

A tax, fee or charge listed in the Treasurer's Determination under Division 81 of the GST Act is not consideration for a taxable supply and therefore, not subject to GST. If that tax, fee or charge is incurred by the builder, and is included in the price of supplies made by the builder, it no longer has the character of a tax, fee or charge that is subject to the Treasurer's Determination under Division 81. So, it does not matter if the builder invoices a client separately for these costs – they still form part of the price of the supplies made to the client. The builder will be liable for GST if those supplies are taxable supplies.

For example, a builder incurs a fee for the supply of a building permit from the council and seeks to recover this cost by including it in the price of the construction services to the client. The supply to the builder is not subject to GST because of Division 81 of the GST Act. But the builder will be liable to pay GST on the price of the services supplied to the client if the requirements of section 9-5 of the GST Act are satisfied.

However, if a builder pays, as an agent for a client, a tax, fee or charge, and is reimbursed by the client for the payment, the reimbursement will not be subject to GST. This is because the reimbursement is not consideration for a supply made by the builder. In this situation, the tax, fee or charge is effectively incurred by the client, rather than by the builder.