GST core
Claiming GST credits
Claiming GST credits means recovering the GST included in your business purchases by reporting it on your BAS, provided you are registered, the purchase is creditable and you hold a valid tax invoice.
A GST-registered business can generally recover the GST it pays on purchases made for its business. This is done by claiming a credit on the Business Activity Statement. The GST credits are subtracted from the GST you collected on sales, so your payment to the ATO is the net amount, or you get a refund if your credits are higher.
To claim a credit you need to meet several conditions. You must be registered for GST, the purchase must be for a creditable purpose, which means it is for your business and not private or to make input-taxed supplies, and the supplier must have charged GST. For purchases over $82.50 including GST, you also need a valid tax invoice. For purchases of $1,000 or more, the invoice must also identify you as the buyer.
The credit is usually claimed in the BAS for the tax period in which you have the invoice and, for accrual reporters, when you are invoiced or pay, whichever happens first. Businesses using the cash method generally claim in the period they pay. If you miss a credit, you can usually claim it in a later BAS, but there is a time limit of four years from the due date of the BAS for the period in which the credit could have been claimed.
On the BAS, the GST credits are reported at label 1B, with the purchases that give rise to them reported at G10 for capital purchases and G11 for other purchases. The amounts you include in these labels should match your accounting records, so reconciling your software to your bank statements before lodging helps avoid errors. Purchases that are GST-free or input-taxed still appear in the purchase labels but do not generate credits.
Common mistakes include claiming credits without a valid tax invoice, claiming GST on personal purchases, claiming entertainment expenses that are not covered by fringe benefits tax, and forgetting to apportion mixed-use items. Another is claiming credits for supplies from suppliers who are not registered for GST, since no GST would have been charged. Check the invoice shows the supplier's ABN and the GST amount.
Keep tax invoices and related records for at least five years, in a form that can be produced if the ATO asks. This page is general information only, so confirm your position with the ATO or a registered tax professional.
Worked example
A registered electrician buys tools for $1,320 including GST from a registered supplier and holds a tax invoice naming the electrician as buyer. GST included is $1,320 / 11 = $120. On the quarterly BAS the electrician reports the purchase at G11 (or G10 if capital) and claims the $120 at label 1B. If $120 of GST on sales was also collected, the net payable is reduced accordingly.
Practical tips
- Check each supplier invoice for the ABN and GST amount before you claim, and keep it for five years.
- Reconcile your accounting software to bank statements before lodging, so that your credit claims match your records.
- Ask suppliers for a tax invoice at the time of purchase, because it is harder to get one months later.