A settlement offer should make the GST treatment clear

The same figure can mean different payments

You are preparing a formal settlement offer and everyone agrees on a headline amount. Before approving it, ask the lawyer and tax adviser whether the proposed wording makes the tax treatment clear. Do not assume a settlement amount always has the same GST treatment as the original invoice, or that silence means both sides understand the same total payment.

Identify what the amount resolves

Imagine a dispute involving unpaid invoices, alleged damages and proposed legal costs. Give the advisers the components and original documents. Ask how the proposed amount should be described and documented. Avoid combining different items into one round number and leaving the accountant to infer their treatment after the agreement has already been signed.

Keep the forecast basis explicit

business.gov.au's cash-flow guidance says to state whether figures include or exclude GST. Apply that clarity to the commercial instructions supporting the offer, while leaving the tax analysis to the qualified adviser. The guidance does not determine the GST result for your settlement. It supports ensuring that the directors understand the actual cash amount they are approving.

Source: business.gov.au: Set up a cash flow statement

Check the draft against the instructions

Compare the proposed payment clause, any tax wording and the schedule of amounts. Ask the lawyer to explain what the other party would pay or receive under the draft. In the mixed-claim example, a phrase adding tax where applicable may need closer consideration. Do not assume the recipient will interpret an ambiguous amount exactly as your own team intended.

Keep costs consequences separate

Ask the lawyer whether the offer's form, timing and content are appropriate for the intended legal purpose, including any possible costs argument. Clear tax wording alone does not guarantee a favourable costs order. Do not copy a formal offer from another matter and insert a new total without reviewing how its components and conditions fit this dispute.

Approve the complete economic result

Record the advised total, payment timing and any accounting documents required if the offer is accepted. Ensure the authorised decision-maker approves the actual arrangement rather than a shorthand figure. A useful settlement offer leaves the parties and advisers able to explain what the amount covers, how tax has been addressed and what cash must change hands.