9.07 What can I claim as disbursements which are not subject to GST?

Disbursement are not subject to GST and it does not constitute a supply. It is where the registered person does not have the legal obligation to pay for the goods or services or a party to a contract and the discretion to alter the nature or value of supplies made between his customer and the third party supplier but is authorized by his customer to make payment to the supplier on his behalf. At such, any recovery of a payment incurred by the registered person in his capacity as paying agent on behalf of another party in order to discharge its payment obligation is treated as a disbursement.

You may only treat a payment on behalf of a client for goods and services to a third party as a disbursement for GST purpose if the following conditions are satisfied:

a) You acted for your client when paying the third party.

b) The client actually received and used the goods or services provided by the third party.

c) The client knows that the goods or services would be provided by the third party.

d) The client authorized you to make payment on his behalf.

e) The client was responsible for paying the third party.

f) The payment is separately itemized when invoicing the client.

g) You recover only the exact amount which you paid to the third party.

h) The goods and services paid for are clearly additional to the supplies which you make to the client.

Any payments made on behalf of the client which satisfy the above conditions can be regarded as disbursements for GST purposes and such payment may include-

a) non-taxable disbursements including exempt and out of scope supplies and supplies by non-taxable person.

b) taxable disbursements.

c) statutory fees such as seeking and obtaining statutory approvals from proper authorities.