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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.
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.
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:
A supply you make is a financial supply only if it is listed in the GST regulations.
Examples of financial supplies include:
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:
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
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.
October 2012 - last edited October 2012
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.
And Geoff that will change tomorrow, or even today, depending on who you talk to there.
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.
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.
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!!