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A GST-registered agency must charge and remit GST on its commission

A worked RES examination question on commission and forms, from our Paper 2 bank — with the rule it turns on, and why each of the four options is right or wrong.

Paper 2Lesson 1Commission and formsFree — no sign-up

The question

An invoice dispute has soured an otherwise smooth deal, with the landlord convinced both that the rate is fixed by law and that GST has been tacked on where it should not be. A landlord disputes his agent's invoice, insisting there is a fixed statutory commission rate of 2% and that GST should never be added on top of commission. The agency is GST-registered.

Which statement correctly states the position on commission and GST?

  1. A. Commission has no fixed rate and is negotiated; a GST-registered agency must charge and remit GST.
  2. B. CEA fixes the rate at 2% for residential leases, and GST is always absorbed within it.
  3. C. Commission is negotiable, but GST cannot be charged on estate agency commission at all.
  4. D. Commission must follow CEA's published schedule, and GST is payable only if the client agrees.

The answer, and why

Answer: A

The rule. There is no fixed statutory commission rate; commission is negotiable. A GST-registered agency must charge and remit GST on its commission.

Why A is correct. Commission is negotiated, not fixed, and the GST-registered agency must charge and account for GST on top of it.

The other options.

  • B invents a fixed 2% rate with GST absorbed. There is no fixed rate.
  • C says GST cannot be charged on commission. A GST-registered agency must charge it.
  • D ties commission to a CEA schedule and makes GST optional. Neither is right.

Exam note. No fixed commission, and GST is not optional for a GST-registered agency — it must be charged and remitted.

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