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  • Reverse charge in the valuable metals industry

    The A New Tax System (Goods and Services Tax) Act 1999 (GST Act) as it relates to precious metals has been amended with effect from 1 April 2017.

    From 1 April 2017, a mandatory reverse charge applies on business-to-business transactions of valuable metals. This applies to sales between GST-registered suppliers and GST-registered purchasers to all taxable supplies of gold, silver or platinum.

    A reverse charge transaction makes the purchaser responsible for remitting GST, rather than the supplier. It makes it easier and faster for businesses in the valuable metal industry to meet their GST and reporting obligations.

    To support introduction of the new law, interim arrangements applied from 1 January 2017 to 31 March 2017. These arrangements allowed sellers and purchasers to enter into a voluntary reverse charge (VRC) arrangement. During this time, GST-registered businesses (sellers and purchasers) that entered into a VRC arrangement had to submit a worksheet to report and reconcile these transactions, in addition to lodging their business activity statement (BAS).

    The reverse charge worksheet does not apply for tax periods after 1 April 2017.

    Note: The reverse charge is not applicable when you are buying and selling to customers who are not carrying on a business (individual – non-business entities). In these situations, the normal GST rules apply.

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    What the reverse charge means

    The reverse charge means that from 1 April 2017, if you:

    • buy valuable metals from another business, you       
      • no longer need to pay GST to the seller
      • are responsible for reporting and paying the GST amount when you lodge your BAS
    • sell valuable metals to another business, you       
      • must clearly state that the sale is a reverse-charged sale on the tax invoice you provide, this also applies if you are a buyer and you use recipient-created tax invoices
      • are responsible for reporting the sale when you lodge your BAS.

    The reverse charge makes the purchaser of the supply rather than the supplier responsible for remitting GST. This aligns the GST payable on the supply with the purchaser's credit entitlement. The GST payable and credit entitlement will both be netted off on the purchaser's BAS.

    A reverse charge provides a level playing field for businesses and makes it easier for businesses in the valuable metals industry to meet their GST obligations.

    Example: Applying a reverse charge transaction

    On 1 April 2017, GoldX Refining buys scrap gold (a taxable supply item) from Scrap Metals Pty Ltd for $1,100 (GST inclusive). Both entities are registered for GST, and complete their activity statement using the calculation worksheet method (GST inclusive amounts). The transaction is business-to-business.

    Under the reverse charge mechanism, the seller and buyer are now required to do the following.


    • Scrap Metals Pty Ltd is required to treat the scrap gold sale with GoldX Refining as a reverse charge in the corresponding BAS reporting period for this transaction. In this example, the reverse charged GST amount is $100 and the taxable supply amount is $1,100       
      • no GST is reported by Scrap Metals Pty Ltd at Label 1A for this transaction
      • Scrap Metals Pty Ltd is still required to report the taxable supply amount of $1,100 at Label G1
      • the tax invoice or recipient created tax invoice needs to state the wording reverse charged against the related supply item.


    • In the corresponding BAS reporting period for this transaction, GoldX Refining is required to        
      • pay the related supplies amount of $1,000 to Scrap Metals Pty Ltd and the reverse charged GST amount of $100 (10%) to us
      • report the reverse charged GST amount of $100 at Label 1A
      • report input tax credits using G11 or Label 1B in the usual way. In this example, if GoldX Refining is entitled to an input tax credit for this purchase, it would report the transaction at Label G11 ($1,100) or Label 1B ($100).
    End of example
      Last modified: 17 Jan 2020QC 50847