Australia does not have a UK-style domestic reverse charge for sub-contractor labour. GST reverse charge in construction is narrow, mainly covering imported services, going-concern sales, and certain high-value transactions.
No
general construction RCM
10%
standard GST rate
Div 84
imported services rule
In the UK, since 1 March 2021 a domestic reverse charge has applied to most construction services between two GST-registered businesses. This rule does not exist in Australia. Australian sub-contractors invoice with GST at the standard 10% rate; the head contractor pays the gross invoice and claims GST credits in the normal way through the BAS.
There are, however, three narrow situations where reverse charge GST does apply to construction projects in Australia.
If you (a GST-registered Australian business) acquire services from outside Australia for a creditable purpose — for example overseas architects, engineers, structural design or BIM consultants — and the supply isn't connected with Australia, you are usually liable for GST under the reverse-charge rule in Division 84.
When you sell a business or development project as a "going concern" (e.g. a partly-completed development with all contracts in place), the supply can be GST-free under Subdivision 38-J if the seller and buyer agree in writing and the buyer is GST-registered.
This is technically a GST-free supply rather than a reverse charge, but it's frequently grouped with reverse-charge concepts because the head contractor / buyer effectively assumes the GST treatment going forward. Get specialist advice before relying on the going-concern provisions on a construction project — the conditions are strict.
Less commonly relevant to construction: GST reverse-charge rules apply to certain gold, silver and platinum supplies between dealers (Division 86 of the GST Act). This came in to combat carousel fraud and rarely affects mainstream construction businesses.
For a typical Australian sub-contractor invoice in construction:
Sub-contractor invoice: Net $10,000 + 10% GST $1,000 = $11,000
Head contractor pays: Full $11,000 to sub-contractor
Head contractor BAS: Claims $1,000 GST credit at 1B
Sub-contractor BAS: Reports $1,000 GST at 1A
Plus: head contractors must report annual contractor payments via the TPAR by 28 August.
For developers selling new residential premises, GST applies on the sale and the buyer (if a purchaser) may be required to withhold GST at settlement and remit it directly to the ATO under the GST at settlement rules. This is sometimes called a "buyer-side" reverse charge, though technically it's a withholding mechanism. Standard rate is 1/11 of the sale price (or 7% under the margin scheme).
No. Sub-contractor labour invoices include 10% GST as normal. There's no domestic reverse charge between Australian construction businesses.
When a GST-registered Australian business buys services from an overseas supplier (e.g. overseas architect or engineer) where the supply isn't connected with Australia. Self-assess GST at 10% under Division 84.
A buyer of new residential premises (or potential residential land) must withhold GST — usually 1/11 of the contract price (or 7% under the margin scheme) — and remit it to the ATO at settlement, rather than the developer.
Strictly GST-free under Subdivision 38-J. There's no GST on the sale, and conditions include both parties being GST-registered and a written agreement before settlement.
Add the calculated GST at 1A (GST on sales) and claim the same amount at 1B (GST on purchases) if you have a creditable purpose. Net effect: usually zero.