QBCC home warranty insurance tax codes

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QBCC require trade contractors to collect and then pay Home Warranty Insurance to the QBCC on behalf of consumers. Contractors are not entitled to a GST credit for payment of this insurance and are not required to remit the GST component to the ATO as the contractor is not the end user and a tax invoice is only sent to the consumer, the contractor only gets a receipt to say insurance was paid. What tax codes should I use for both receiving and then paying this insurance.?
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Michelle Munchow

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Posted 1 year ago

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Charles van Rotterdam

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It sounds like it's not even income for the contractor (does he make any money on this?) in which case I would treat it like a reimbursable expense
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Michelle Munchow

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Contractor makes no money out of it. Contractor collects the insurance premium and passes it onto the QBCC. We are a painting contracting business and this new insurance is a new development of the Queensland Building & Construction Commission. When we quote on a job we include the premium in the quoted price. We do not collect any money until after job is completed (in most cases unless a large job we will ask for a deposit), but the insurance premium has to be paid to the QBCC before any work commences.
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Michelle Munchow

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Contractor makes no money out of it. Contractor collects the insurance premium and passes it onto the QBCC. We are a painting contracting business and this new insurance is a new development of the Queensland Building & Construction Commission. When we quote on a job we include the premium in the quoted price. We do not collect any money until after job is completed (in most cases unless a large job we will ask for a deposit), but the insurance premium has to be paid to the QBCC before any work commences.
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Charles van Rotterdam

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Well then you don't want to see it as income otherwise you'll be paying tax on it. As I said I would see it as a reimbursable expense but as it has to go on an invoice it would probably be best to set up a new service item called "insurance" give it the No-Tax code and point it to 'other income' line and then when you pay the insurance also with No-Tax pay it out of the 'other income' that way that line item should always come back to zero.

It is OK to keep the 'other income' and 'other expense' separate, just make sure it's not part of normal income when it comes to Tax time

(Edited)