Special arrangements
Agent
In GST, an agent acts for another person, the principal, in making or receiving supplies. The principal is generally treated as the one making the supply, and the agent's commission is separate.
An agent is someone who acts on behalf of another party, called the principal, when dealing with third parties. Typical examples include real estate agents selling a property, travel agents booking tours, auctioneers selling goods and online platforms that sell on behalf of vendors. The GST law has special rules for agents because the money and the supplies involved do not belong to the agent.
The basic principle is that when an agent makes a supply for a principal, the supply is treated as made by the principal, not the agent. If the principal is registered for GST and the supply is taxable, the principal is responsible for the GST on the full sale price. The agent does not account for GST on the principal's sale just because it handled the money, although it may need to give a tax invoice on the principal's behalf.
Separately, the agent provides a service to the principal, usually for a commission or fee. That fee is the agent's own supply, and if the agent is registered for GST, the commission is generally taxable and GST is charged on it. The principal can claim a credit for that GST if the purchase relates to its business and a valid tax invoice is held. So there are two separate supplies to consider: the underlying sale and the agency service.
The same logic applies when an agent buys on behalf of a principal. The principal is treated as the buyer, and credits are claimed by the principal where the purchase is creditable and a tax invoice exists in the principal's name. An agent that merely passes on costs without being genuinely an agent may find the transactions treated differently, so it is important to document the relationship properly.
A common misunderstanding is that an agent can simply report all the money it collects as its own sales. If an agent reports the whole gross receipts, it may overstate its GST turnover and pay GST that belongs to someone else. Another misunderstanding is that agents must always register. Registration depends on the agent's own GST turnover, which includes its commission but not the principal's sales.
Contract terms matter. Written agency agreements clarify who is the supplier, who issues invoices, and who bears the GST. Where the agent's role is unclear, for example because it sets the price, takes on risk or sells in its own name, it may be treated as a principal itself. Online marketplaces and sharing economy platforms are a modern area where these questions arise.
The details can be intricate, so this page is general information only. Confirm your situation with the ATO or a registered tax professional.
Worked example
A registered real estate agent sells a commercial shop for a registered owner for $1,100,000 including GST, and charges commission of $22,000 plus GST. The owner accounts for $100,000 GST on the sale. The agent's commission is $22,000, plus GST of $2,200, a total of $24,200. The agent reports $2,200 as GST on its sales, and the owner may claim the $2,200 as a credit.
Practical tips
- Do not report a principal's sales as your own. Report only your commission as your supply, unless you are genuinely the seller.
- Put agency arrangements in writing so it is clear who makes the supply and who issues tax invoices.
- Remember that your registration depends on your own turnover, which for an agent generally means commission and fees.