GST And Mortgage Managers Fees

Although more than six years has passed since the introduction of GST, there is still considerable confusion regarding borrower fees, particularly where mortgage managers are involved.

Normally GST is relatively simple for businesses - they obtain an input tax credit for GST paid when purchasing supplies and charge GST when they sell supplies.

The situation is more complicated for financiers because financial supplies are input taxed – this means there is no GST payable by the person acquiring the supply (usually the borrower). The supplier (the lender) is entitled to either no input tax credit or a reduced input tax credit (RITC) depending on the type of supply purchased.

An RITC is 75% of a full input tax credit and is available for many but not all supplies which the lender outsources.