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Ultimate Partner
Geoff_
Posts: 1,246
Registered: ‎21-11-2007
Australia
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GST on Late Fees for outstanding invoices.

Hi all

 

Good one for you MamaMia(Super Partner)

 

Does anyone know (and I am sure there is someone who does) when you raise late fees for an outstanding invoice should it have gst added to it, or is it gst free?

 

I have Googled and cannot find any definitive answer. And the ATO website is as equally non committal.

 

I notice if you charge interest on outstanding invoices then there is no gst.

Geoff
Busselton Bookkeeping Service - Bookkeeper and
MYOB Certified Consultant , BAS Service Provider,
Servicing Busselton, Vasse, Yallingup, Cowaramup, Margaret River, Dunsborough, Augusta. Phone 9754 7680
www.busseltonbookkeeping.com.au
e-mail geoff_bookkeeper@hotmail.com
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MYOB Moderator
Will_H
Posts: 1,696
Registered: ‎24-04-2012
New Zealand
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Re: GST on Late Fees for outstanding invoices.

Hi Geoff,

 

I understand your post was originally directed to other partners and accountants, and I'm sure you know I'm not qualified to give a full answer to this one.


We recommend contacting the ATO, or an accountant about any financial advice issues.  

 

As you are an accountant and it's still a stumper, I have to recommend the ATO or your industry association as good places to get further answers.

 

If you find out, I'm sure other users would appreciate the answer being posted here.  I know my interest is piqued.

Kind regards,

Will
MYOB Client Support

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Ultimate Partner
Julie_A_C
Posts: 2,603
Registered: ‎07-09-2010
Australia

Re: GST on Late Fees for outstanding invoices.

Hi Geoff

 

I have noticed that when a business charges a late fee they usually have it that it is GST inclusive and as I have a tax invoice stating this I will claim the GST back from the ATO but if you  read the following from the ATO site I am now wondering whether it should actually be Input taxed (using the ITS instead of INP code we discussed elsewhere - and I think way back when there was only one code that applied to either a sale or purchase).

 

How to report financial supplies

Whichever method you use to complete your activity statement, you must complete:

  • G1 (total sales) - report the amounts you earned from making financial supplies - this includes items such as interest, related fees, and the margin on derivatives for the reporting period
     
  • G10 (capital purchases) and/or G11 (non-capital purchases) - report the total amount you paid, or were liable to pay, on all purchases relevant to the reporting period - this includes purchases you used to make financial supplies
     
  • 1A (GST on sales) - do not include any GST amounts relating to financial supplies you made - a financial supply is input taxed so you do not report a GST amount
     
  • 1B (GST on purchases) - do not include any GST on financial acquisitions you made unless one or more of the exceptions applies to you because you generally cannot claim GST credits on purchases you use for making financial supplies (see The four exceptions for claiming a GST credit).

Financial supplies

A supply you make is a financial supply only if it is listed in the GST regulations.

Examples of financial supplies include:

  • lending or borrowing money
  • providing your customers with goods on credit for a fee
  • creating, maintaining and closing your customer's bank account
  • life insurance
  • dealing in
    • debt
    • equity
    • unit trusts
    • partnership interests
    • futures contracts.

You can make financial supplies even if you are not a financial institution. For example, even though a department store is not a financial institution, it can provide customers with credit and charge interest on that credit. This is an input taxed financial supply.

 


I would be thinking that your late fee would fall into the 2nd example of a financial supply and therefore the following would apply

 

 

Charging GST and claiming GST credits

Financial supplies are input taxed. This means you:

  • do not pay GST to us on financial supplies you make
  • cannot generally claim GST credits for the GST included in the price you paid for anything you purchased to make those supplies.

However, there are four exceptions to the general rule about claiming GST credits for purchases you use to make financial supplies.

 


All the above is available at the ATO site

http://www.ato.gov.au/businesses/content.aspx?menuid=45028&doc=/content/42954.htm&page=3&H3

 

but maybe when you have the time you can ring the ATO and verify if a late fee is classified under example 2 or not and let us know.

 

 

 

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
ph: 0417 927 654 email: accuratebooks7@gmail.com
Accurate Books Always (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)
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Ultimate Partner
Geoff_
Posts: 1,246
Registered: ‎21-11-2007
Australia
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Re: GST on Late Fees for outstanding invoices.

[ Edited ]

Hi Julie and Will

 

Sorry been flatout all week with BAS and training but just spoke to the ATO regarding  GST on Late Fees for outstanding accounts. It definitely has GST on it.

 

If a % interest is charged then that that is classified as an Input Tax Sales. (Receipt) (ITS) and does not have GST on it.

Geoff
Busselton Bookkeeping Service - Bookkeeper and
MYOB Certified Consultant , BAS Service Provider,
Servicing Busselton, Vasse, Yallingup, Cowaramup, Margaret River, Dunsborough, Augusta. Phone 9754 7680
www.busseltonbookkeeping.com.au
e-mail geoff_bookkeeper@hotmail.com
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Ultimate Partner
Julie_A_C
Posts: 2,603
Registered: ‎07-09-2010
Australia
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Re: GST on Late Fees for outstanding invoices.

And Geoff that will change tomorrow, or even today, depending on who you talk to there.  :smileyhappy:

 

All in all though, I would say that it is better to charge GST on it and send it off rather than not. 

 

One thing you can rely on with the ATO is that they never have a complaint about you sending them too much money only when you don't.

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
ph: 0417 927 654 email: accuratebooks7@gmail.com
Accurate Books Always (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)
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Ultimate Partner
Geoff_
Posts: 1,246
Registered: ‎21-11-2007
Australia
0 Kudos

Re: GST on Late Fees for outstanding invoices.

Hi Julie

 

Your the greatest.

 

I know you are right. What's the rule if you want a decision by the ATO? Ring up the ATO up 3 times, ring up 3 accountants and then take the answer that suits you..

 

But please let me bathe in the words of wisdom given to me by the lady at the ATO. Although she did go off to check with someone before she gave me an answer. She was a very nice lady.:smileyhappy:

Geoff
Busselton Bookkeeping Service - Bookkeeper and
MYOB Certified Consultant , BAS Service Provider,
Servicing Busselton, Vasse, Yallingup, Cowaramup, Margaret River, Dunsborough, Augusta. Phone 9754 7680
www.busseltonbookkeeping.com.au
e-mail geoff_bookkeeper@hotmail.com
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Ultimate Partner
Julie_A_C
Posts: 2,603
Registered: ‎07-09-2010
Australia

Re: GST on Late Fees for outstanding invoices.

Well Geoffrey, you were goddamm lucky on getting a nice female there, but maybe that is because you were a smooth talking male.

 

Most of the females I have come across have been bossy little things wielding their power.

 

Thank you for the giggle, loved the Accountant/ATO joke!  A bit like a blond joke to us in the Accounting field.....oh oops..it wasn't a joke it's fact!!

Julie Carter AIPA, BBus(Acctg),
MYOB Professional Partner, Registered BAS Service Provider
Associate Member of Institute of Public Accountants
ph: 0417 927 654 email: accuratebooks7@gmail.com
Accurate Books Always (Servicing from Leederville to Pinjarra, Fremantle to Armadale WA)
Please use plain text.