Claiming GST credits¶

When you are registered for GST, you charge GST on your sales. But you also pay GST on many of the things you buy for your business. A GST credit lets you claim that GST back. It is also called an input tax credit.

You claim your GST credits on your business activity statement (BAS). The credits reduce the amount of GST you have to send to the Australian Taxation Office (ATO), so getting them right matters for your cash flow.

In one line

A GST credit lets a GST-registered business claim back the GST included in the price of the things it buys for the business.

Why this matters¶

If you do not claim the GST credits you are entitled to, you pay more GST than you need to. If you claim credits you are not entitled to — for example on a private purchase — you can end up having to pay that amount back. Knowing the conditions helps you claim the right amount.

What you will learn¶

What a GST credit is and when you can claim one
The conditions that must be met to claim a GST credit
How to split a purchase used partly for business and partly for private use

Understanding the concept¶

A GST credit is the GST that was included in the price of something you bought for your business. The ATO says you can claim a credit for the GST included in the price you pay, as long as certain conditions are met.

To claim a GST credit, the ATO says all of these need to be true:

You are registered for GST. You claim the credit on your BAS.
The purchase is for your business, not for private use.
The purchase included GST in the price — that is, it was a taxable sale to you. Your supplier needs to be registered for GST.
You hold a tax invoice for the purchase (for purchases over a set amount — see below).
The purchase does not relate to making input-taxed sales. Input-taxed sales are sales where no GST is charged and, generally, no credits can be claimed on related purchases.

The tax invoice rule. The ATO says you must have a tax invoice to claim a GST credit for a purchase that cost more than $82.50 (including GST). For smaller purchases, other records can be enough. The next lesson covers tax invoices in full.

A time limit applies. The ATO says there is a four-year time limit for claiming GST credits, so it pays to claim them in the right period.

Apportioning for part-business, part-private use. Some things are used partly for the business and partly for private life — a phone, a laptop, a car. The ATO says you can only claim the GST credit for the business part. If you use something 50% for business, you can claim 50% of the GST. This split is called apportioning.

For accountants & bookkeepers

The creditable-purpose test in the GST law asks whether the acquisition is made in carrying on the enterprise and does not relate to input-taxed supplies or a private or domestic purpose. Where an acquisition has a private or domestic component, the ATO expects supplementary documentary evidence, alongside the tax invoice, that clearly identifies the creditable and non-creditable portions. Some businesses may be eligible to use annual private apportionment, claiming full credits during the year and making a single adjustment at year end.

Example¶

Priya runs a small graphic-design studio and is registered for GST. She buys a new monitor for the studio for $660, which includes $60 of GST. Because the monitor is for her business, she was charged GST, and she holds a tax invoice, Priya can claim a $60 GST credit on her next BAS.

Priya also buys a laptop for $2,200 (including $200 of GST). She uses it 80% for the business and 20% for personal things at home. She can only claim the business part, so she claims 80% of the $200 GST — that is a $160 GST credit — and leaves the other $40 out.

Common mistakes¶

Claiming a GST credit on a purchase that had no GST in the price — for example a GST-free item, or a supplier who is not registered for GST.
Claiming the full GST credit on something used partly for private life instead of apportioning to the business part.
Claiming a credit for a purchase over $82.50 (including GST) without holding a tax invoice.
Claiming credits on purchases that relate to input-taxed sales.

How this works in myaccountant¶

In the app — when you record a business purchase, myaccountant captures the GST included in the price and works out the GST credit for you. You can attach the tax invoice to the purchase so your records are complete. When you prepare your BAS, the credits from your purchases are totalled for you under your chosen accounting method.

Key points¶

A GST credit lets a GST-registered business claim back the GST in its purchases.
You claim GST credits on your BAS, and they reduce the GST you owe.
The purchase must be for the business, must have included GST, and must not relate to input-taxed sales.
You need a tax invoice to claim a credit for a purchase over $82.50 (including GST).
For part-business, part-private purchases, claim only the business share.
The ATO applies a four-year time limit for claiming GST credits.

Learn next¶

General information only — not tax, super or financial advice.

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