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There are two elements that form the overall contract price for the Cost Plus Contract – the cost of the work and the builder’s profit.
The “cost of the work” is defined in the Cost Plus Contract under clause 3.2 to include:
The builder’s profit is the money that you are charging the owner on top of the cost of the work. You can charge the owner a lump sum, which is a set fee for the whole job, or a profit percentage based on the cost of the building works. This should be specified under Item 8 of the contract.
Unless an additional amount is stated for GST on top of the builder’s fee, it is taken that the builder’s fee is GST inclusive. This applies whether your fee is a lump sum or expressed as a percentage.
You should be careful to take into consideration any input tax credit you are entitled to before adding profit and GST. Only charge GST on the actual cost you have incurred and not on GST that you have paid.
There are three steps involved in calculating the value of a payment claim using a profit percentage.
Add up the net cost (GST exclusive) of the cost of the work.
Example :
Item | Net cost (ex. GST) |
Timber |
$12,000.00 |
Labour | $11,590.00 |
Insurance | $3,200.00 |
Cost of the work | $26,790.00 |
Apply GST to the cost of the work.
Example :
Item | Cost |
Cost of the work | $26,790.00 |
GST (10%) | $2,679.00 |
Total cost incl. GST | $29,469.00 |
Apply the profit percentage.
Example :
Item | Cost (incl. GST) |
Total cost | $29,469.00 |
Profit percentage (15%) | $4,420.35 |
Total payment claim | $33,889.35 |
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