Hoping someone with a better understanding of tax and/or consumer law can give a view here. Am in the process of building. Our builder, a large business with good buying power, gives us an allowance of $30 per m2 for tiles to be selected from only 2 shops. At those shops I’m told that if we’re building through builder X our quoted price is the full list price of the tile, but, as I did yesterday, if I tell them i’m buying privately i can get a much better price – for what it’s worth i was quoted $28m2 yesterday.
Now, the tile shop openly told me that while I am ‘charged’ the list price, our builder pays them a much lower price because of their buying power, and the tile shop invoices me directly for any cost above the set allowance. Basically they collude to get more money from you.
To give a practical example and explain why I’m not convinced what’s going on is legal. My allowance is $30m2. My tile of choice is $35m2 retail. Lets say for argument sake my builder is paying $22m2. My builder buys it off the shop and gst is payed on the purchase (gst on $22 m2). The shop then invoices me directly for the difference between my allowance and the full retail price (allowance $30m2, retail $35m2, difference is $5 m2 on which i pay gst). However no gst is payed on the $8 m2 that is the amount between what my builder paid and my allowance.
The way I see it a few people win and lose in this situation. My builder wins because they charged me an allowance of $30m2, but only paid $22m2 for the goods. The tile shop wins because they got the sale to the builder and a bit of cream on top from me. I lose for obvious reasons. But taxpayers including some of you also lose because the true GST payable wasnt paid.
As I understand this is a fairly widespread practice and besides the fact they seem to be avoiding some gst, it also seems to me that collusion like this may be illegal (or at least immoral). Over to you..