Suitable for: Anyone who is registered for GST purposes
Tax Difficulty: Easy
Airtax Experience: First-time users
Time to Read: 2-3 minutes
“GST credit” is a very common BAS term, that you will get familiar with as you complete your BAS. Put simply, when you list valid expenses on your BAS form, the GST credits you receive for these expenses help offset any GST you owe the ATO from your sales in the course of your business activity (e.g., freelance photography, carpentry, rideshare driving, etc.).
This article will show you how to determine whether or not you’re eligible to claim an expense in your BAS, and are therefore entitled to a GST credit. We’ll also explain how the Airtax BAS form can help make claiming expenses through your BAS a breeze.
So...When can I claim a credit?
Once you are registered for GST, you can claim GST credits on most purchases you make in connection with your business activity - so long as all of the below requirements are met.
- The purchase was made (at least partly) for your business, and it does not relate to making input-taxed supplies. These are “sales of goods and services that don't include GST in the price”.
- The expense amount included GST (check your tax invoice to be sure of this).
- You have actually paid for the expense during the period
- You need to be able to substantiate the expense. For expenses over $82.50 (inc. GST) you should have a tax invoice from the supplier.
It is important to note that whilst many purchases you make will have GST included, some expenses do not include GST (e.g. water, and some components of your car registration). Expenses that do not have GST attributable to them should not be listed on your Airtax BAS.
It is also possible that some of your expenses will be used partially for your business and partially for your own personal use. For example, the running costs of a car that is used for both business and personal purposes. In this case, you can only claim a GST credit to the extent that the purchases relate to your enterprise. Therefore you will need to work out the extent of use for your business (business use percentage) and include this in your BAS to ensure you are only claiming the correct GST credit. As an Airtax user, you don’t need to worry about the tricky calculations of GST credits - our easy to use form will handle this. Just input the total amount spent (incl. GST) on each expense item for a period, and then assign a business use percentage next to it. You’ll notice our live GST calculator at the top of the form will change accordingly.
Now that you know what a GST credit is, and the requirements an expense needs to meet in order to be claimable in the BAS, you can read this Help Centre article which explains how the business use percentage works on the Airtax BAS form. If you're unsure about when you need to be reporting BAS, you can check out this article here.
What you have learned:
- The four key requirements that need to be met in order to be able to list an expense on your BAS
- How GST credits are claimed on the Airtax BAS form
- The importance of being able to distinguish between personal and business uses for your expenses.