7 October 2011
Q - Dishonour & admin Fee
When Council is charged a dishonour fee by the bank for a dishonoured cheque or direct debit, it recoups the cost by on charging the dishonour fee plus admin cost. The dishonour fee is input taxed and the admin cost is taxable but when it is charged to the customer, it is charged as one fee. Would the whole fee then become taxable?
A - Yes, the whole fee is subject to GST, since it no longer has the character of a dishonour fee. This works in much the same way as a landlord on-charging rates to a tenant.