Key requirements
The relevant question is whether the recipient provides goods or services in return. Punitive compensation for a contractual default is not a supply where nothing is provided in exchange. The source illustrates a landlord receiving a specified early-termination amount without supplying anything additional; GST is not accounted on that amount. By contrast, where a tenant fails to restore damage and the landlord engages repairs then recovers their cost, the landlord is treated as supplying repair services and accounts for GST on recovery. Examine the contractual obligation and what was actually done for the payer. Keep the termination or damage records and separate pure compensation from reimbursements for services; similar payment amounts can have different tax outcomes.
Official source
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