The terminology doesn't decide the answer

"Reimbursement," "on-charge," "recharge," "cost recovery" and "disbursement" get used almost interchangeably in everyday business, but for GST purposes they're not automatically the same thing. Calling something a "reimbursement" on your invoice doesn't make it GST-free, and calling it an "on-charge" doesn't automatically mean GST applies. What matters is the substance of the arrangement.

The real question: who was legally liable for the cost?

This is the test that decides it:

If your customer was legally liable for the expense, and you simply paid it on their behalf — you're acting as their paying agent. You’re passing on what you paid for them, and the GST treatment follows the original expense. If the original expense had no GST (like some government fees), you don't add GST when recovering it either.

Example: You pay a council application fee that's legally your client's obligation, then bill them back the exact amount. No GST added — you're just passing through what you paid.

If you were legally liable for the expense — it was genuinely your cost of doing business — and you're recovering it as part of what you're charging the customer, that's an on-charge or cost recovery. It's treated as part of your supply to the customer, and GST applies at your standard rate on the full amount, regardless of whether the original expense had GST on it or not.

Example: A tradesperson buys materials for a job (the trade business is the one liable to the supplier, not the customer) and bills the customer for materials plus labour. GST applies to the full invoice, including the materials component — even if some individual items you bought were GST-free.

A separate case: reimbursing your own employees

If you reimburse an employee for a work-related expense they paid for personally, you can generally claim a GST credit. The expense needs to be taxable and directly related to your business, and your employee needs to give you a tax invoice or receipt for anything over $82.50 including GST. Two things to watch: you and your employee can’t both claim the credit for the same expense, and a set allowance (a flat travel amount or cents per kilometre, for example) isn’t a reimbursement, so no GST credit applies. This is a different situation to on-charging a customer, so try not to mix them up.

Why this matters in practice

Getting it wrong in either direction causes real problems:

• Charging GST when you shouldn't overcharges your customer and can create a mismatch between what you've reported and what happened.

• Not charging GST when you should can mean under-reporting GST payable.

If you’re not sure which applies, check before you invoice, not after.

What to check

• Was the customer legally liable for this cost, or were you?

• Did you pay it as your customer’s agent, for something they owe, or was it a cost you incurred to deliver your own service?

• Do you have a valid tax invoice for anything you're claiming a GST credit on?

If you're not sure how a particular arrangement should be treated — especially anything involving related entities, property outgoings, or ongoing recharge arrangements — that's exactly the kind of thing worth checking with us before it becomes a pattern in your books.