Special arrangements
Auctions
At an auction, the auctioneer usually acts as agent for the seller, so GST depends on whether the seller is registered, and the auctioneer charges GST on its own commission.
Auctions involve several parties and several payments, so GST can look confusing. There is the owner of the item, the auctioneer who conducts the sale, and the successful bidder. Each of them may have a different GST status. The key to getting it right is to separate the sale of the item from the services the auctioneer provides.
In most cases the auctioneer acts as an agent for the seller. This means the sale of the item is treated as being made by the seller, not by the auctioneer. If the seller is registered for GST and selling in the course of its enterprise, the sale is generally taxable, and GST is included in the hammer price. If the seller is a private individual or is not registered, no GST applies to the sale of the item.
The auctioneer provides its own services to the seller, typically for a commission and sometimes for listing and marketing fees. If the auctioneer is registered, those services are usually taxable, and the auctioneer charges GST on them. The seller, if registered, may claim a credit for that GST. The auctioneer also issues the proper tax invoices on behalf of the seller for taxable sales where appropriate.
Some auctions charge the buyer a premium on top of the hammer price. The buyer's premium is generally the auctioneer's own supply to the buyer, so GST applies to it in the usual way if the auctioneer is registered. Buyers should note that the premium and the price may be taxed differently, so the total GST in a purchase may combine different parts.
Special rules may also apply to the margin scheme, which can be relevant to property and second-hand goods sold by registered sellers. Where the margin scheme applies, GST is calculated on the margin instead of the full price, and the buyer cannot claim a credit for the full price. Auctions of seized or repossessed goods can also have their own treatment depending on who is selling.
Auctioneers who are unsure whether the seller is registered should obtain this information before the auction. A common error is to assume that every auction sale includes GST, or that none does. Another is failing to separate the auctioneer's commission from the proceeds forwarded to the seller. Clear terms of sale and written agency agreements help avoid disputes.
This page is general information only, so confirm your circumstances with the ATO or a registered tax professional.
Worked example
A registered farm-equipment dealer sells a trailer through an auctioneer. The hammer price is $11,000 including GST, so the sale carries GST of $1,000, which is reported by the dealer. The auctioneer charges 5% commission, $550 plus GST of $55, total $605, and pays the dealer $10,395, being $11,000 less $605. The dealer may claim $55 as a credit.
Practical tips
- Establish before the auction whether the seller is registered, because it determines whether GST is part of the sale price.
- Keep the item sale and the auctioneer's commission separate in your records.
- Check whether the margin scheme applies, since it changes how GST is worked out and what the buyer can claim.