Guide
Input tax credits: claiming back the GST you pay
What you can claim, what you cannot, and how private use and partial purchases affect credits.
What is an input tax credit?
An input tax credit is the amount you can claim back for the GST included in the price of something you buy for your business. Registered businesses subtract their credits from the GST they collected, and report the difference on the BAS. Credits are what make GST a tax on the final consumer rather than a tax on every business in the chain.
The conditions for claiming
To claim a credit you must be registered for GST, buy the item for your business, the purchase must include GST, you must hold a valid tax invoice if the price is over $82.50, and you must claim it within the time limit, which is generally four years. The item must also not be input-taxed in its onward use, because credits are not allowed on costs that relate to making input-taxed supplies such as residential rent.
Private use and apportionment
If you use something partly for business and partly for private purposes, you can only claim the business share. A vehicle that is used 70% for business gives a 70% credit on its GST. The same principle applies to phone plans, home office costs and any asset with mixed use. Keep a basis for the percentage, such as a logbook.
Capital purchases
You can claim GST credits on equipment and other capital purchases in the same way as on everyday expenses, provided the purchase is for your business. These appear on a separate label on the BAS. Special limits apply to cars, where the credit is capped at a threshold set by the law each year, so check the ATO website for the current figure.
What you cannot claim credits for
You cannot claim credits for purchases that do not include GST, such as wages, most bank fees, residential rent, and GST-free items. You cannot claim private expenses, and you cannot claim without a valid tax invoice when one is needed. Some entertainment and fringe benefit costs have special rules.
Timing
Credits are generally claimed in the reporting period you hold the tax invoice and the payment obligation arises, which depends on whether you use cash or accruals accounting. If you miss a credit, you may be able to claim it later within the four-year window by including it in a later BAS.
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