GST Output Tax: Recovering expenses

Key requirements

An expense incurred in your own capacity and recovered from another party is a reimbursement. If the recovery is consideration for a supply, GST generally applies unless the supply is exempt or qualifies for another treatment. A true disbursement is a payment made as agent for the principal: its recovery is not a supply and the agent cannot claim the principal’s input tax. For example, an auditor’s own travel cost recovered from the client forms part of its taxable service; the transport provider’s original treatment does not decide the reimbursement rate. Separate any administration mark-up and assess that service independently. Billing between departments of the same company is disregarded. Check the contractual obligation, invoice recipient and actual beneficiary rather than relying on the label “reimbursement” or recovering the exact amount.