What can builders charge GST on?

[nD4ng3r]

There was a thread on this a while back, but didn't answer my question satisfactorily, plus I have some additional questions.

I got a quote from a builder to build a new house with a fixed price contract which lists a bunch of items including labour, materials, council fees, geotech fees, etc., and then he's added GST to the whole lot. This seems wrong to me.

First: I get that when a builder buys materials, he may or may not add on a markup and if he does then he is required to charge GST on them. That's fine, although surely he should only be charging GST on the markup, not the ((Materials + GST) + Markup) + GST? Otherwise, the government is making a killing off this and the end consumer pays a heap of extra tax.

Second: I don't believe the builder should be charging GST on council fees or geotech fees as he's not onselling them or adding a markup. Is this correct?

Thirdly: If the builder agrees that I should buy some of the materials myself (i.e. kitchen appliances) he should deduct those from his quote, correct?

Any info appreciated. Thanks.

[Perry]

The only thing you need to check in (1) and (2) is that the builder is adding GST to the GST-less price of the items he procures for your job.

The builder is required to charge GST on all the services provided. It's that base price (as above) that the GST is calculated on that's critical.

(3) Ordinarily - yes. Depends on the wording of the contract.

[Rosco]

1) Builder buys materials for $100 + GST
margin added say $20
So charges you $120 + GST = $138 incl GST

If you purchased the materials yourself, generally you don't get as much discount, so might be $115 + GST for example or cost $132.25 incl GST

This is normal and fair

2) council fees, geotech fees. Same as 1) above

Council fee might be $10,000 + GST. Or $11,500 incl GST

So builder would charge you $10,000, plus margin, plus GST. So might be $12,000 + GST = $13,800 incl GST

If a builder is organising and paying the bill for you, then they want a margin for the risk they take on and for their time to organise etc.

Ross

[John the builder]

why didnt you "get this" the first time?

First: I get that when a builder buys materials, he may or may not add on a markup and if he does then he is required to charge GST on them. That's fine, although surely he should only be charging GST on the markup, not the ((Materials + GST) + Markup) + GST? Otherwise, the government is making a killing off this and the end consumer pays a heap of extra tax.

Second: I don't believe the builder should be charging GST on council fees or geotech fees as he's not onselling them or adding a markup. Is this correct?

Thirdly: If the builder agrees that I should buy some of the materials myself (i.e. kitchen appliances) he should deduct those from his quote, correct?

1. If the quote is fixed price (and that says excl gst) then it is the quote plus gst, This is mandatory and you dont know what the calcultaion is? That is why you need to understand the basis of the quote

if it is charge up plus gst then he should tender pre gst prices and labour and mark upo and add gst to the total (what ever is agreed)

When he does his GST he can claim GST he pays against total GST collected on any income. He pays the difference.

If you pay gst on gst then that is extra profit for him. You can only be sure if you see the invoices and you are entitled to see them on charge up but not a contract quote.

It is customary to quote "plus gst" to keep things simpler?

2. If you dont think he should be charging gst on council fees you ate overlooking that council are also adding gst to their invoices. (and they put gst on rates as well tax on a tax?......)

3. You could also expect a refund on mark up if agreed prior, otherwise the builder is entitled to be paid the markup even though you buy it depending on contract terms. If you agree to provide he may not allow for these?

[Meehole]

I'm sure if he could he would have given you a price inclusive gst and without any break downs, would that suffice? Or inclusive gst and broken down into labour, materials etc? Or do you think he should be doing the job and making no profit?
AS for supplying your own materials, depends what they are. Are you going to warranty the 'materials' yourself and sign a disclaimer excluding him from being responsible for a possible defect or failure? What say the kitchen appliances you supply are substandard and they need replacing. Who is responsible to bear the cost of removing the old ones? What say a shower you supplied leaks?
I would walk away from your job and tell you to project manage your own. In my experience usually when a client starts quibbling over costs at the outset, that's a fairly good indication of how the job will finish. A cluster!

[sidinz]

Meehole, you always get so reactionary when people question tradies' billing practices. The fact is that there are some dodgy tradies out there who cheat in their invoicing.
I don't blame the OP one bit for checking that he's not paying GST on GST. I'm sure there'd be a few sole traders out there who are not clued up on such things and who do structure their invoices incorrectly.

[jimO]

regarding owners supplying their own gubbins....a job i was on late last year the owners supplied the plumbing fittings, about a week after the bathroom was finished it was discovered the shower mixer was faulty and had caused a couple of grands damage to the room next door, wall had to be stripped relined, stopped, painted, the new oak flooring had to be refinished.......the plumber had to suck it up as the owner decided they should have checked the mixer prior to fitting....i can guarantee that plumber wont be fitting any more owner supplied gear

[sidinz]

regarding owners supplying their own gubbins....a job i was on late last year the owners supplied the plumbing fittings, about a week after the bathroom was finished it was discovered the shower mixer was faulty and had caused a couple of grands damage to the room next door, wall had to be stripped relined, stopped, painted, the new oak flooring had to be refinished.......the plumber had to suck it up as the owner decided they should have checked the mixer prior to fitting....i can guarantee that plumber wont be fitting any more owner supplied gear

So plumber-supplied fittings can never be faulty?

[AlFa]

So plumber-supplied fittings can never be faulty?

1. It can
2. It's very unlikely as they only go with trusted brands
3. In worst case they have insurance

[Meehole]

So plumber-supplied fittings can never be faulty?

A plumber will always go back to his supplier and that at least spreads the liability. Plus a tradesperson (reputable) will often use Brandz appraised or tried and tested fittings that they can rely on.
It is common knowledge in the residential construction sector that fixtures imported from China,or not supported by warranties here in NZ should be steered clear of.
Cheap is not always good and for a reason.

[Meehole]

Meehole, you always get so reactionary when people question tradies' billing practices. The fact is that there are some dodgy tradies out there who cheat in their invoicing.
I don't blame the OP one bit for checking that he's not paying GST on GST. I'm sure there'd be a few sole traders out there who are not clued up on such things and who do structure their invoices incorrectly.

I get frustrated because as a business owner who dots the i's and crosses the t's, we are constantly in competition with others that don't follow the rules and undercut us as they don't declare all their income, especially cash jobs, pay under the table so no PAYE, kiwisaver or ACC.
And yes our worst clients, fortunately not many, have been the ones who at the outset started quibbling about prices and wanting ways to cut costs. Lower the staffs hourly rate or supply their own materials.
We walk away now. WE try and build trust with the client so they engage us because they are comfortable with our work ethics and standard and know we won't rip them off.
We treat our clients the same we would want to be treated.
We supplied our own outside lights purchased off Trade Me, the electrician refused to install them initially but reneged when we said we wouldn't hold him responsible for them. They haven't blown up but they have rusted terribly and will need replacing very soon.

[jimO]

So plumber-supplied fittings can never be faulty?

of course they can but the plumber wouldnt have bought a cheap mixer the last time he was in australia on holiday like the homeowner did