• Including GST and claiming credits

    If a payee is not registered for GST, they cannot include GST in the price of the goods or services they supply, nor are they entitled to GST credits.

    If a payee is registered for GST, they can claim GST credits for any GST paid on items they buy and use in performing the work under the voluntary agreement.

    Payees may also need to charge GST for the goods or services they supply the payer under the voluntary agreement. This depends on whether or not the payer is entitled to a full GST credit.

    Note:

    The payer must indicate on the voluntary agreement form if they are entitled to a full GST credit.

    If the payer:

    • would normally be entitled to a full GST credit, the payee can't charge GST on the goods or services they supply under the voluntary agreement
    • is not entitled to a full GST credit and the payee is registered for GST, the payee must charge GST on any goods or services subject to GST supplied under the voluntary agreement.

    Example: Payer entitled to full GST credit

    Tony is a self-employed bricklayer. He wins a contract with Housebuilders Inc., a house building company, to complete all of the bricklaying for Housebuilders related to their current property development. Tony and Housebuilders agree to enter into a voluntary agreement so that Housebuilders withholds amounts from the payments to Tony.

    Tony is registered for GST. He can't include GST in the price he charges for the bricklaying services for Housebuilders because they are entitled to a full GST credit. However, he can claim GST credits for any GST paid on goods or services he buys or uses in performing the work.

    Example: Payer NOT entitled to full GST credit

    Jim runs a computer programming business and contracts with Big Bank Inc. to help develop a program for internet banking. Jim and Big Bank agree to enter into a voluntary agreement so that Big Bank withholds payments from Jim.

    As Big Bank makes financial supplies it is not entitled to claim GST credits for the things it buys, including Jim's services, that relate to the supply of financial services. Jim is registered for GST and so must include GST in the price he charges Big Bank. Jim can also claim GST credits for any GST paid on goods or services he buys or uses in performing the work.

    End of example
      Last modified: 04 Feb 2016QC 16225