You can claim a credit for any GST included in the price of any goods and services you buy for your business. This is called a GST credit (or an input tax credit – a credit for the tax included in the price of your business inputs).
When you can claim a GST credit
You can claim a credit for any GST included in the price you pay for things that you use in your business. This is called a GST credit (or input-tax credit, a credit for the tax included in the price of your business inputs). You claim GST credits in your activity statement.
You can claim GST credits if the following four conditions apply:
• you intend to use your purchase solely or partly in carrying on your business and
the purchase does not relate to making input-taxed supplies
• the purchase price included GST
• you provide, or are liable to provide, payment for the item you purchased
• you have a tax invoice from your supplier (for purchases over $82.50).
You must be registered for GST to claim GST credits. You must also satisfy four other conditions and the purchase must not be for private use.
When you cannot claim a GST credit
You cannot claim a GST credit:
• without a valid tax invoice
• for purchases that do not have GST in the price
• for wages you pay to staff (there is no GST on wages)
• for motor vehicles priced above a certain limit.
• Goods and services that don’t have GST in their price include:
• GST-free items (such as basic foods)
• Input-taxed items (such as bank fees and loan interest)
• purchases from a business that is not registered for GST (and therefore cannot charge GST).
If in doubt, check whether the invoice for the item states that there is GST in the price.
You also cannot claim GST credits for the following, even if GST is included in the price:
• purchases you intend to use for private or domestic purposes
• purchases you intend to use to make input-taxed supplies, such as those associated
with providing residential accommodation
• some purchases that you can’t claim as an income tax deduction, such as entertainment expenses
• land purchases under the margin scheme.
You cannot claim GST credits for purchases that do not have GST in the price (such as food and wages), purchases to make input-taxed supplies (for example, financial services) or purchases for your private use. Special rules apply when claiming GST credits for some motor vehicles.
GST credits and income tax deductions
If you can claim a deduction for a business purchase in your tax return, claim the amount of the purchase less any GST credit to which you are entitled. If you can’t claim a GST credit, you can claim the full cost of the purchase, including GST, as a deduction.
Special rules for specific GST credit claims
Special rules for claiming GST credits apply to a number of specific types of purchases, including the pre-establishment costs of setting up a company, and the cost of second-hand goods (even if there is no GST in the price):
Pre-establishment costs
If you’re setting up a company, you can claim GST credits for the GST included in the price of some purchases you make before the company comes into existence, such as set-up fees, business registration, trading stock and business premises.
To claim GST credits for these pre-establishment costs the following seven criteria must apply:
• the purchase must be for the purpose of bringing the company into existence or carrying
on a business after it comes into existence
• the company must come into existence and be registered for GST no more than six months after the purchase
• you must become a member, officer or employee of the company
• the company must have fully reimbursed you for the cost of the purchase
• the purchase must not be used to make input-taxed sales or for private purposes
• the company must not be entitled to a GST credit for the purchase, if it subsequently acquires the thing from you
• you must not be entitled to claim a GST credit for the purchase.
