• Option to reverse charge in the precious metal industry

    From 1 January 2017, business to business sales of precious metal including scrap gold can be, with agreement, reverse charged.

    Find out about:

    What is a voluntary reverse charge agreement?

    Under a voluntary reverse charge agreement, the buyer will pay GST (which is normally paid by the seller) on behalf of the seller. The buyer must pay the GST amount when they lodge their business activity statement (BAS). The buyer will also need to give us the details of any reverse charge of GST they are liable to pay on behalf of the seller.

    Where the buyer is entitled to a GST refund when lodging their BAS, they can direct the ATO to use the refund amount to pay the GST they owe on behalf of the suppliers. This effectively nets the refund for GST credits against its suppliers GST liabilities.

    If you are a buyer or seller in the precious metals industry, your choice to enter into a reverse charge arrangement is voluntary. However, if you choose to do so, we will be in a better position to process your BAS faster. There will also be less need for us to audit these transactions.


    GoldX Refining buys scrap gold from Scrap Metals Pty Ltd, which is registered for GST. GoldX enters into a reverse charge agreement with Scrap Metals Pty Ltd. This means Scrap Metals Pty Ltd will not collect GST in the price of the scrap gold they sell to GoldX.

    The following month, GoldX lodges their latest monthly BAS, along with details about the reverse charge GST they are liable to pay on behalf of Scrap Metals Pty Ltd. GoldX are also entitled to a GST credit for the scrap gold they purchased from Scrap Metals Pty Ltd.

    GoldX works out that they are entitled to an input tax credit for the scrap gold they purchased, which they ask the ATO to use to pay the GST they owe on behalf of Scrap Metals Pty Ltd This means that Scrap Metals Pty Ltd are not liable to pay any GST on the scrap gold they sold to GoldX.

    End of example

    What are the benefits of a voluntary reverse charge agreement?

    Entering into a reverse charge agreement helps:

    • address industry concerns about delays in refunds
    • make it easier for sellers and buyers to meet their GST obligations as the seller does not physically collect GST on the sale and the buyer has no refund to claim
    • decrease the compliance risk rating for the seller and buyer. This means we will make few enquiries about your sales, purchases and claims
    • to promote a level playing field, so members of the precious metals industry meet their GST obligations fairly.

    What sales are covered by a voluntary reverse charge agreement?

    A voluntary reverse charge agreement only covers taxable sales of precious metals, including:

    • goods that consist of gold, silver or platinum, even if those products are not classified as precious metal under GST law
    • gold dore
    • gold granules
    • gold bars which are not investment form.

    If you require further information about the reverse charge option, contact us by:

    Next step:

    See also:

    Second hand goods draft determination

    Draft Goods and Services Tax Determination GSTD 2017/D1: Goods and services tax: what is excluded from being second-hand goods by paragraph (b) of the definition of that term in Division 195 of the A New Tax System (Goods and Services Tax) Act 1999 has been published. You are invited to provide comments by 15 March 2017.


    The draft determination excludes finished goods, such as watches, rings, antique jewellery or collectable coins that are purchased and sold as finished goods by second hand dealers. Therefore, most second hand dealer transactions will not be affected by the draft GSTD.

    The draft determination applies to those transactions where a second hand dealer purchases an item such as defaced gold bars or gold jewellery and the price paid by the dealer is determined largely by reference to the value of the gold in the item. The draft determination may also affect transactions (by requiring apportionment of credit claims) where a dealer acquires an item like a diamond ring in order to remove the diamond and sell the gold in the ring separately as scrap.

    For legitimate pawn brokers or second-hand dealers, the draft determination does not take effect immediately. The date of effect of the determination is the commencement of the first tax period after date of publication of the final GSTD. For example, if the final GSTD is published on 15 June 2017, it will only apply to transactions occurring on or after 1 July 2017.

      Last modified: 23 Feb 2017QC 50847