GST Guide for Retailers (PDF, 383KB)
If you collect deposits or downpayments from customers, you need to know when to charge GST. The GST treatment depends on what type of deposit you collect.
On this page:
GST treatment for different types of deposits
There are 2 types of deposits with different GST rules:
| Partial payment deposits | Refundable security deposits | |
|---|---|---|
| Purpose | Forms part of the payment for goods or services | Collected as security (e.g. for safe return of goods, property damage) |
| When to charge GST | When you receive the deposit | When you use the deposit to offset against the payment due |
| If you refund the deposit | Adjust GST previously accounted in your GST return with proper documentation | No GST adjustment needed (unless you had used it) |
Example: Deposits as partial payment for goods
You supply textiles to your customer and receive a 20% deposit of the purchase price from your customer when an order is placed. The deposit forms partial payment for the textiles and is refundable to your customer (e.g. if he cancels the order).
When you receive the deposit:
Charge and account for GST, since the deposit represents partial payment for the goods.
If you refund the deposit:
You may adjust the GST previously accounted for in your GST return, provided you maintain the proper documentation (e.g. credit note issued to your customer).
Example: Refundable deposit collected for leasing a property
You lease a non-residential property to a tenant and collect a rental deposit as security. The lease agreement allows you to offset this deposit against any unpaid rent should the tenant default.
When you collect the deposit:
No GST needs to be accounted for if the deposit is refundable upon completion of the lease term.
When you use the deposit for rent:
GST must be accounted for at the time when you utilise the deposit to offset the unpaid rent.
Example: Deposits forfeited for early termination of contract
You lease a non-residential property to a tenant and collect a rental deposit as security. The lease agreement allows you to retain the deposit if the tenant requests early termination of the tenancy agreement.
When you collect the deposit:
No GST needs to be accounted for if the deposit is refundable upon completion of the lease term.
When the deposit is forfeited:
You do not need to account for GST on the deposit forfeited if the forfeiture arises from early termination under the terms of the tenancy agreement.