The Goods and Services Tax (GST) is a value-added tax paid for goods or services sold for domestic consumption. It’s paid by the consumers when buying products or getting some services and remitted by the businesses specifically to the Australian Tax Office (ATO). But did you know that you can claim a credit for any GST included for purchased products or hired services?
In this article, we will share more about what GST credit is and when you can claim it.
What GST credit is
GST credit is a credit for the tax included in the price of your business inputs. Also called an input tax credit, this allows you to recoup funds from the ATO or offset this credit against the GST amount you’re liable to remit. If such credit is higher than your tax liability, you’ll be able to get a refund from the ATO. To claim a credit, you must:
- Be registered for GST.
- Purchase goods or services with GST in pricing to use for your business.
When to claim a GST credit
Keep in mind that there are certain instances when you’re entitled to claim a GST credit, such as the following conditions:
- When the purchase price includes GST
- When your purchase is solely or partly for your business
- When you are liable to provide payment for the goods or services
- When you have a tax invoice from your supplier
All it takes is to report the GST you pay and the GST credits you’re entitled to obtain on a monthly, quarterly, or annual basis. Likewise, remember that a four-year time limit applies for claiming GST credits.
What you cannot claim for GST credits
There are a few things you need to know when looking to claim GST credits. Take note of the details below:
- GST-free purchases:
Some products and services are GST free, such as basic food, exported goods, and health services. As such, you cannot claim credit for them as GST isn’t included in their pricing. - Input taxed purchases:
Some goods and services are considered “input taxed,” such as financial supplies and renting or selling certain residential supplies. You cannot claim GST credits for these purchases as well. - Purchases for private use:
You cannot claim credits for the GST you pay for goods and services used for private purposes only. However, if you purchase goods or services for both business and personal use, you can only claim a GST credit for the part used for business.
When you need a tax invoice
When you want to claim a GST credit for a purchase that’s A$82.50 (including GST), you will need a tax invoice. Take note of these circumstances:
- Incomplete tax invoice:
You need to ensure that it has complete and correct tax information. If there is any missing information, be sure to request a valid tax invoice from your supplier. - No invoice received:
If your supplier doesn’t respond to your request for a valid tax invoice and you can obtain the missing information, you can reach out to the ATO directly via email or mail.
Aside from the tax invoice, you may need these details for purchases less than A$82.50:
- Cash register docket
- Receipt
- Invoice
On the other hand, if you don’t have those documents, you must keep a purchase record with these pieces of information:
- Name and ABN of the supplier
- Date of purchase
- Description of the items purchased
- Amount paid
Conclusion
At this point, you now know what GST credit is and when to claim it. When you ensure that all your records are accurate, you can rest assured that you will have a smooth period with the ATO. As such, be sure to consider all the valuable information discussed above, and we hope this article has shed some light on what you need to know about GST credit!
We’re an accounting firm on the Gold Coast that helps clients and businesses manage their finances by increasing profits and reducing taxes. If you’re looking for professional business accountants to help you deal with your GST credit, get in touch with us today to see how we can help!
