If your business pays a cost and bills it back to a client, you have a pass-through. It sounds simple, and businesses get it wrong constantly. Do you charge GST on the recharge? Does it count as your revenue? Should it touch your profit and loss at all? The answer to all three turns on one question: are you acting as an agent or as a principal? Get that wrong and you misstate your GST and your reported revenue. This guide explains how to get it right.
Published: June 2026
A pass-through cost is an expense your business incurs that is ultimately borne by your client. It shows up under different names:
These are not interchangeable for tax purposes. How you record each, and whether GST applies, depends on whether the cost was incurred by you as a principal or paid by you as the client's agent.
This is the hinge. Australian GST law, through the Tax Office ruling GSTR 2000/37, treats agent and principal arrangements very differently.
The label on your invoice does not decide this. Substance does. A useful rule from the Tax Office guidance: if a cost is supplied to you to enable you to perform your service to the client, GST is payable when you recover it, whether you itemise it separately or roll it into your fee. Separating it out on the invoice does not make it GST-free.
No single factor is decisive, but the Tax Office guidance points to indicators of a genuine agency relationship:
If instead you contract with the supplier in your own name, carry responsibility for delivering the result to the client, and bear the risk, you are almost certainly a principal. Note that having no margin does not make you an agent. A business can recharge a cost at exactly what it paid and still be a principal, because principal status is about control and responsibility, not profit.
If you are a principal:
If you are an agent (a genuine disbursement):
Getting this wrong is a common and costly error. Coding a principal recharge as GST-free understates the GST you should charge and miss the credits you could claim.
The accounting standard for revenue, AASB 15, uses the same principal-versus-agent distinction, decided by whether you control the good or service before it passes to the client. The indicators include who has primary responsibility for fulfilment, who carries the risk, and who has discretion in setting the price.
This matters beyond compliance. If you are a principal recharging large pass-through amounts, your reported revenue can look far bigger than the business you actually run, which distorts margin analysis, benchmarking and valuation. Knowing which lever applies keeps your numbers honest.
Whichever you are, set it up cleanly:
This is exactly the kind of detail that trips up generalist bookkeepers and where a finance team that does it routinely earns its keep. Scale Suite handles pass-through and recharge accounting as part of our finance services. For the agency-specific version, see our guide on recharging ad spend and supplier costs.
Do I charge GST when I recharge a cost to a client?
It depends on whether you are a principal or an agent. As a principal, yes, you charge GST on the recharge and claim the credit on the cost. As a genuine agent paying a disbursement, the recovery is generally not subject to GST because the supply was to the client, not to you.
What is the difference between a disbursement and a recharge?
A disbursement is a third-party cost you pay as the client's agent, where the supply is to the client. A recharge is usually a cost supplied to you that you on-charge as a principal. The GST treatment differs accordingly.
Does charging the cost with no markup make me an agent?
No. Principal versus agent is about control and responsibility, not profit. You can recharge at cost and still be a principal, in which case GST applies on both legs.
Does itemising a cost separately on the invoice make it GST-free?
No. The Tax Office guidance is explicit that if a cost is supplied to you to deliver your service, GST applies when you recover it whether or not you itemise it separately. Substance governs, not invoice layout.
How do pass-through costs affect my reported revenue?
As a principal, pass-throughs gross up your revenue and cost of sales, even at nil margin, which can make your top line look much larger than the real business. As an agent, only your fee is revenue.
What does AASB 15 say about principal versus agent?
AASB 15 decides it by whether you control the good or service before it transfers to the client, using indicators like primary responsibility for fulfilment, risk and pricing discretion. Principals gross up; agents net off.
Should I run pass-throughs through a separate bank account?
Where volumes are high, yes. Separating pass-through funds and accounts keeps them from being confused with your own trading and makes reconciliation far cleaner.
Scale Suite is a Sydney-based provider of outsourced finance teams and fractional CFO services for Australian SMEs. We deliver weekly bookkeeping, payroll, BAS/IAS lodgement, cashflow reporting, management accounts, and strategic fractional CFO oversight, all as a fully embedded team that works inside your business.CA-qualified, Xero Certified, and registered BAS Agents, we replace fragmented bookkeepers and once-a-year accountants with one responsive finance function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
We review and check this guide periodically. At the time of writing (June 2026), all information was current. Scale Suite is a registered BAS Agent, not a licensed tax advisor or financial advisor. This content is general information only and does not constitute professional tax, financial, or legal advice. Some details may change over time.
Scale Suite is a Sydney-based provider of outsourced finance and HR services for Australian SMEs. We deliver bookkeeping, financial reporting, payroll processing, fractional CFO support, recruitment, employee onboarding, people and culture support, and fractional HR oversight, all as a fully embedded team that works inside your business.
Employment Hero Gold Partner, CA-qualified, and Xero Certified, we replace fragmented finance and HR processes with one responsive, senior-level function at a fraction of the cost of full-time hires. We serve growing businesses across Sydney, Melbourne, Brisbane, and Perth, with packages starting from $1,500 per month and no lock-in contracts.
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