Once you are registered for GST, you can claim GST credits on most purchases you make in connection with your enterprise.
There are a few key conditions you need to meet to be able to claim GST credits on expenses, these include:
1. The purchase was made solely or partly for your business, and it does not relate to making input-taxed supplies.
2. The expense amount included GST.
3. You have paid for the expense during the period (assuming you are reporting on a cash basis)
4. 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 therefore no GST credit can be claimed.
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 enterprise. 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.
Business use percentage example:
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% for your ride-sharing enterprise and therefore could claim 70% of fuel costs relating to this car for the period.
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.