When you make purchases for your business, you can only claim GST credits if you meet three criteria:
- your business is registered for GST
- the purchase price includes GST
- you have proper tax invoices for purchases above $82.50 (including GST)
The ATO recommends you make sure you check tax invoices for the amount of GST paid, rather than dividing total business costs by 11. Some basic food items like fruit and vegetables are GST-free and can’t be claimed on your activity statement.
If the invoice says “price includes GST”, you can divide the total purchase price by 11, provided you use the item solely for business purposes. If the item includes private use, you can only claim a GST credit for the portion used for business.
If you account for GST on a cash basis and you’ve only partly paid for the purchase, you can only claim a GST credit on the paid portion.
You must hold valid tax invoices for business purchases over $82.50 (including GST). Other documents like bank statements, purchase orders or delivery receipts aren’t sufficient to meet the tax invoice requirements.
When you can claim a GST credit
You can claim a credit for any GST included in the price you pay for things you use in your business. This is called an input tax credit, or a GST credit.
You claim GST credits in your business activity statement, and you can claim GST credits if the following conditions apply:
- You intend to use your purchase solely or partly for 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 more than A$82.50).
When claiming GST credits, make sure your suppliers are registered for GST. You can check the GST registration status of an entity by searching the ABN Lookup website www.abr.business.gov.au/.
A four-year time limit applies for claiming GST credits.
GST-free sales
You don’t include GST in the price if your product or service is GST-free. You can still claim credits for the GST included in the price of purchases you use to make your GST-free sales.
Most basic foods, some education courses and some medical, health and care products and services are exempt from GST.
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