GST and the agent model
When you sell through independent sales agents in Australia, GST obligations can get confusing. Who charges GST on the sale? Who charges GST on the commission? Do agents need to be registered? Understanding the basics will keep you compliant and avoid costly mistakes.
The sale to the customer
When a customer buys your product, your business is the seller. You charge GST on the sale (assuming you are GST registered and the product is not GST free). The agent facilitated the sale, but you are the entity making the supply.
This means the tax invoice comes from your business to the customer, and you are responsible for reporting the GST on that sale in your Business Activity Statement.
The commission payment
The commission you pay to the agent is a separate transaction. The agent is providing a service to you (sales representation), and if they are registered for GST, they should issue a tax invoice for their commission that includes GST.
Your business can claim an input tax credit for the GST component of the commission payment, which offsets some of the GST you collected on the underlying sale.
Agent GST registration
In Australia, individuals and businesses with turnover above $75,000 per year must register for GST. If an independent sales agent earns more than $75,000 annually in commissions, they must be registered.
Agents earning below the threshold can choose to register voluntarily. Many do, because it allows them to claim input tax credits on their business expenses.
If an agent is not registered for GST, they should not charge GST on their commission invoices. Your business does not get an input tax credit in this case, which makes the commission effectively more expensive.
Practical considerations
Check agent registration. Before engaging an agent, confirm their GST registration status. If they provide an ABN and are GST registered, request tax invoices for commission payments.
Accounting treatment. Set up your accounting system to track agent commissions separately. This makes BAS preparation simpler and ensures you claim all entitled input tax credits.
International agents. If you engage agents outside Australia, GST generally does not apply to their commission payments (the service is performed outside Australia). However, the rules around cross border services can be complex, so consult your accountant for specific situations.
Using platforms for compliance
One advantage of using a platform like Zepys for managing sales agents is that the platform can handle much of the administrative overhead around payments and documentation. This reduces the risk of missing invoices, incorrect GST treatment, or compliance gaps.
Get professional advice
Tax law is nuanced and this article covers general principles only. Your specific situation may have complexities that require professional guidance. Talk to your accountant or BAS agent about the correct GST treatment for your sales agent arrangements.
The key takeaway is that using independent agents does not change your fundamental GST obligations on sales. It adds a second layer (the commission) that needs correct treatment. Getting this right from the start is much easier than fixing it later.