Common GST categories
Precious metals
Precious metals such as investment grade gold, silver and platinum have special GST treatment: the first supply by a refiner is GST-free, and later dealings are generally input-taxed.
Precious metals have a special GST rule designed for investors and traders. In the GST law, the term refers to gold, silver or platinum in an investment form that meets a minimum purity standard, generally at least 99.5 per cent purity for gold and 99.9 per cent for silver and platinum. This covers items such as bullion bars and some coins sold at their metal value.
The rule has two stages. The first supply of the precious metal after it has been refined is GST-free when made by the refiner or in some cases by another person in the chain for the first time after the metal is refined. After that, later supplies of the same metal in investment form are generally input-taxed. So the GST is effectively kept out of the investment market and is not added to each resale.
The input-taxed treatment means a dealer who buys and sells investment grade bullion does not charge GST on the resale but cannot claim credits on costs related to those supplies. A refiner making the first GST-free supply, however, can claim credits for its related purchases. The distinction between GST-free and input-taxed therefore affects the cost of doing business at each stage.
Not everything made of gold or silver is covered. Jewellery, ornaments, scrap, dental gold, and coins sold for more than their metal value as collectables are not treated as investment-grade precious metals and are generally taxable. Second-hand goods rules may also apply to some items. The classification depends on the purity, form and purpose of the item.
Typical misunderstandings include assuming all gold sales are GST-free, treating jewellery as bullion, and forgetting that scrap and refined products are treated differently. Another is thinking that buying bullion as a private investor creates a GST obligation. A private individual who is not in business and not registered does not charge GST when selling their bullion, though other taxes, such as capital gains tax, may apply.
If you deal in precious metals as a business, keep records of purity certificates, the refining stage and the form of each item sold. For business and investors, the income tax treatment is also a separate question. This content is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A registered bullion dealer buys a 1 kg gold bar of investment grade purity from another dealer for $90,000 and resells it for $92,000. Both supplies after the first refiner sale are input-taxed, so no GST is paid or charged on the bar. If the dealer pays $330 including GST for security services connected only with this trading, the $30 GST in that fee cannot generally be claimed as a credit.
Practical tips
- Check purity and form before treating a sale as bullion. Jewellery and collectable coins are generally taxable.
- Record whether each sale is the first supply after refining, since that decides whether the sale is GST-free or input-taxed.
- Hold purity certificates and refinery paperwork with each bar or coin, because the GST treatment depends on proving the metal's standard.