Paying sub-contractors registered for GST

Hi all,
I just registered myself for an ABN number and got my first job from a company.


However, I'll use sub-contractors to get the work done.

One of the contractor is registered for GST.

Let say I quoted the job for $12x and the company will pay me that amount.

Then:
(i) $5x will go to subcontractor-A who is not registered for GST.
(ii) $5x will go to subcontractor-B who is registered for GST.
(iii) $2x is what is left for me.

Can someone clarify how to deal with subcontractor-B who is registered for GST?

Do I have to charge GST from the company on top of the $12k then pay GST for Subcontractor-B?

Cannot find enough information online.


Thanks!
 
Correct me if I'm wrong anyone, but I think you can only charge the company giving you the job gst if you yourself are registered for gst because you are the principal contractor. So if your not registered for gst and you have a contractor registered for gst you will have to either pay them the gst on the $5000 being an extra $500 making it $5500 or you pay them $5000 including gst which will mean they will get paid $4545.46 + $454.54 in gst
 
If you aren't registered for GST then you cannot issue a tax invoice. In your example, you will get paid $12x on an invoice.

You will pay a) $5x; b) will get $5.5x (assuming you have quoted his pre-gst amount) and c) you get $1.5x

If you were registered for gst, you would be charging $12x+gst and paying:
a) $5x, b) $5x + gst; c) $2k (to you) and d) ATO ($1,200 -$500) $700
 
I just registered myself for an ABN number and got my first job from a company.

Start at the beginning ...

Are you required to be registered for GST ?

In other words, is your projected turnover $75,000 ?

Projected turnover is the current month and the next 11 months.
 
This could be a mess in the making....

From the $12K the ATO will expect $1090 leaving $10,909...Then you pay one contractor $5K leaving $5,909. Then the other hands you his invoice for $5,000+GST = $5500. You have $909 left, not $2k.
 
This could be a mess in the making....

From the $12K the ATO will expect $1090 leaving $10,909...Then you pay one contractor $5K leaving $5,909. Then the other hands you his invoice for $5,000+GST = $5500. You have $909 left, not $2k.

Tell him the really bad news. After deductions, then the ATO also wants another cut, whether it be income tax or 30% company tax, dependant on how you're set up! :(


pinkboy
 
Start at the beginning ...

Are you required to be registered for GST ?

In other words, is your projected turnover $75,000 ?

Projected turnover is the current month and the next 11 months.

I have a full time 5 figure job and this is just a side thing and the turn over will be less than $75k.
 
Now I am getting confused.

Do I have to pay tax on the $12x? or I pay tax on only what is left for me? $2x?

Ok - So you are unreg for GST. Lets go back over it.

You quote a client $12K..No GST as you aren't registered. Its good practice to includes a statement such as "No GST is included in the price". You still quote an ABN. Its just an invoice / receipt. You get A & B to do work.

A is reg for GST. He is likely to charge you $5500. You cant claim the $500 in GST paid to him. You need to be careful when accepting quotes that all quotes are inclusive of GST. You should try to get a quote from him for $5,000 incl of GST but good luck with that. Many tradies don't price inclusive of GST which is actually a prohibited practice. Australian Law requires all priced quoted of GST if it is included. +Tax is not a legal expression.

B isn't reg for GST. You pay him $5k.

You will be left with $1,500.

You may not get work from a business. If you charge $12k and another charges $12K incl GST theirs will be cheaper since the GST can be claimed on the other. Also make sure you quote them your ABN on the paperwork or they may withhold.
 
I'd suggest that you register for GST from day one. A couple of reasons:

1. Getting the procedures in place whilst you're starting up is a lot easier than when you're starting to see some success and getting busy.

2. No serious business will take you seriously if you're not registered. My not registering you're saying that you're only dipping your toe in the water and there's a good chance you won't be around next year.
 
I'd suggest that you register for GST from day one. A couple of reasons:

1. Getting the procedures in place whilst you're starting up is a lot easier than when you're starting to see some success and getting busy.

2. No serious business will take you seriously if you're not registered. My not registering you're saying that you're only dipping your toe in the water and there's a good chance you won't be around next year.

I don't agree. You need to evaluate the merits esp if you don't sell to businesses. If Turnover is likely to remain low then you can have a cost advantage selling without incl GST in prices. In its simplest example a ebay seller who is unreg can sell the identical product 9% cheaper.

But its worth evaluation.
 
Hi all,
I just registered myself for an ABN number and got my first job from a company.


However, I'll use sub-contractors to get the work done.

One of the contractor is registered for GST.

Let say I quoted the job for $12x and the company will pay me that amount.

Then:
(i) $5x will go to subcontractor-A who is not registered for GST.
(ii) $5x will go to subcontractor-B who is registered for GST.
(iii) $2x is what is left for me.

Can someone clarify how to deal with subcontractor-B who is registered for GST?

Do I have to charge GST from the company on top of the $12k then pay GST for Subcontractor-B?

Cannot find enough information online.


Thanks!

The simple answer is that you pay the invoices presented to you by your sub-contractors.

You can't charge any GST to your client as you are not registered for GST.

When getting quotes from subbies, you will need to ensure you are getting the 'all-up' price. Ask if they are registered for GST, and if the quote is inclusive or exclusive of GST.

If the quote from Sub B is ex GST, he/she will charge you $500 GST on top of the quoted $5000. Meaning you will be left with $1500 profit, not $2000.
 
If you are selling to registered clients then they will not care if GST is included - they get an input tax credit anyway.

Then you might consider voluntarily registering and charging GST on top. You can then claim an input tax credit for GST charged to you by the subcontractors and on materials.

On the other hand, if most of the inputs are your own personal exertion then it might not be worth it.

If most of your supplies are to unregistered clients and most inputs are your personal exertion then not being registered might give you a price advantage since you won't be collecting GST.

What catches some people in their startup year is the projected turnover test.
 
What catches some people in their startup year is the projected turnover test.

Yes - Its always worth understanding that rule. I'm sure Rob has also seen some who feel that the $75K turnover has to be met before a decision is made to register. That's wrong. Basically I always caution that if TO exceeds $6,250 in any one month then you need to have fairly good reasons why you aren't registered.

The ATO can look back and back-date the registration to that date.

Explanations can include season factors, slow periods, exceptional trading in the month etc.

Large asset purchases (machine, commercial premises, vehicles etc) can be a good reason to register early too. However if you later choose to cancel GST registration there can be a balancing adjustment to repay the GST claimed (in part).

As usual - See professional guidance.
 
Ok, Let me summarize my understandings.
I've an ABN number and UNREG for GST.


(i) I quoted for a job and on my quote the total is $12k. (Is it correct that on my quote I need to put total as $12k Excl. GST? )

(ii) I invoiced the company $12k Excl. GST and received the money. Now I need to pay subcontractors.

(iii) Subcontractor A is not registered for GST so I need to pay him $5k.

(iv) Subcontractor B is registered for GST, therefore I need to pay him either $5k + GST or $5.5k Including GST.


Regarding TAX
Now If I paid Subcontractor A $5k inc. GST and Subcontractor B $5k inc. GST, I've $2k left.

Out of this $2k, I'll have to pay 37% tax as I fall in this tax bracket below:

$80,001 ? $180,000 - $17,547 plus 37c for each $1 over $80,000


I'll have only $1260 left after tax,


I am assuming that:
taxable income = gross income - expenses

which in this situation is:
(Gross income 12k) - (Expenses $10K) = (Taxable Income $2k)


Please do correct me if I am wrong.

Thank you!
 
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I think you have a bigger issue.

If you have billed your client $1,500 (don't know why you would think this includes GST when you aren't registered for GST) and paid out $10,500 to subcontractors then you have a big issue. :p

Give Paul a call to work it all out. First free hour consult might help you along.
 
I think you have a bigger issue.

If you have billed your client $1,500 (don't know why you would think this includes GST when you aren't registered for GST) and paid out $10,500 to subcontractors then you have a big issue. :p

Give Paul a call to work it all out. First free hour consult might help you along.

Hey mike,
sorry made a mistake and I edited the above post..
 
Ok, Let me summarize my understandings.
I've an ABN number and UNREG for GST.


(i) I quoted for a job and on my quote the total is $12k. (Is it correct that on my quote I need to put total as $12k Excl. GST? )

(ii) I invoiced the company $12k Excl. GST and received the money. Now I need to pay subcontractors.

(iii) Subcontractor A is not registered for GST so I need to pay him $5k.

(iv) Subcontractor B is registered for GST, therefore I need to pay him either $5k + GST or $5.5k Including GST.


Regarding TAX
Now If I paid Subcontractor A $5k inc. GST and Subcontractor B $5k inc. GST, I've $2k left.

Out of this $2k, I'll have to pay 37% tax as I fall in this tax bracket below:

$80,001 ? $180,000 - $17,547 plus 37c for each $1 over $80,000


I'll have only $1260 left after tax,


I am assuming that:
taxable income = gross income - expenses

which in this situation is:
(Gross income 12k) - (Expenses $10K) = (Taxable Income $2k)

Have you paid Sub B $5,000 or $5500?

From the numbers in the top half, you have a profit of $1500.

Tax at 37% is $555.
Profit after tax is $945.
 
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