A GST credit is essentially a refund for an amount of GST you paid on a given expense, which was incurred in the course of your business activity (e.g. rideshare driving, freelance photography, etc.).
Once you are registered for GST, you can claim GST credits on most purchases you make in connection with your business activity.
There are a few key conditions you need to meet in order to claim GST credits on expenses, these include:
- The purchase was made solely or partly for your business, and it does not relate to making input-taxed supplies.
- The expense amount included GST (check your tax invoice to be sure of this).
- You have actually paid for the expense during the period (assuming you are reporting on a cash basis)
- You have a tax invoice from the supplier for purchases over $82.50 (inc. GST)
It is important to note that while many purchases that 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. In this case you can only claim a GST credit to the extent that the purchases relates to your business activity. Therefore you will need to work out the extent of use for your enterprise (business use percentage) and include this in your BAS to ensure you are only claiming the percentage of the expense which related to earning your business income.
Airtax business use percentage examples:
Example 1 - let’s say you own a car which you use in the ride-sharing economy and also as a personal car. You use the car to travel 3,500 km for your ride-sharing activity out of a total of 5,000 kms in a quarter. On this basis, you use your car 70% (3,500/5,000) for your ride-sharing enterprise and therefore could claim 70% of fuel costs relating to this car for the period.
Generally you will use the same business use percentage for fuel, car insurance, maintenance and cleaning expenses on your Airtax BAS form - as they all relate to the running of your car. As a result, if you determine business use percentage of your car to be 70%, it is likely that these expenses will all have the same percentage alongside them on your Airtax BAS form.
Example 2 - let’s say you own a camera which you use in your photography business, and also to take personal photographs. You use the camera 20% of the time for personal purposes and 80% of the time to take photographs as part of your enterprise. On this basis, you use your camera 80% for your photography business.