Incorrect claims for third party payments
You can generally only claim a GST credit if you are the recipient of the goods or services purchased. That is, you cannot claim GST credits when you pay a supplier for a purchase made by another party.
There are some exceptions - for example, reimbursing an employee for an expense they incurred that was directly related to their activities as an employee.
Charities and other agencies often make payments on behalf of people or other charitable organisations. The payer cannot claim a credit for the GST paid because these types of payments are made on behalf of others.
GST credits cannot be claimed for third-party payments made on behalf of:
- related organisations, including a non-profit sub-entity (especially if the related organisation is not registered for GST)
- beneficiaries of your activities, for example, if you pay for goods or services (such as electricity) purchased by people who cannot pay (perhaps due to financial hardship).
You should only claim GST credits for goods or services your organisation receives for business use.
For more information about third-party payments, refer to the following sections of External Link Goods and services tax: supplies:
End of further information
- proposition 14 – a third party may pay for a supply but not be the recipient of the supply
- case study 2 – the bus company.