Accounting for GST Credits
GST credits are the GST included in your business purchases. This is also called the input tax credit – tax paid on the purchase of your business inputs. GST credits are offset against the GST payable of the business. If your business GST payable is $100,000 and your GST credits total is $65,000, you are only liable to pay $35,000 to ATO.
Claiming for GST Credits
You can claim GST credits only if you are GST registered. The purchase has to be within four years of filing, included in the activity statement covering the period and applies the four conditions;
Ø The goods or services purchased are intended for the business
Ø The business provided payment for the goods or services
Ø GST is included in the purchase price
Ø Tax invoice is provided by the supplier of purchases over $82.50
For purchases intended both for business and private use – you can only claim GST credit for the portion used for business. Small businesses can account for the private portion and adjust the GST claim once a year.
A tax invoice is required when claiming GST credit for purchases of over $82.50. The tax invoice should be complete and reflects the correct supplier information. If you are provided with an incomplete invoice, request from the supplier for a complete form. The supplier has 28 days to comply after you requested for it. If you do not have the invoice on time, claim the credit on your next reporting period. And if the supplier fails to provide a complete and correct invoice, you can still claim GST credit by;
Ø Send request permission email to GSTmail@ato.gov.au
Ø Write a request permission to:
Australian Tax Office
PO Box 3524
Albury NSW 2640
For GST claims on small purchases, or those that are $82.50 and below, you can present a cash register docket, an invoice, or a receipt if the tax invoice is not available. If you do not have any of the four documents, you can simply record the supplier and its ABN, date of purchase, the amount paid, and description of the purchased items.
How to Compute for the GST Credit
GST is 10% of the purchase price. It is commonly stated in the tax invoice. However, if the tax invoice only shows the paid price inclusive of the GST, you can work out the GST paid by dividing the amount by 11. This is for purchases used entirely for the business.
If the purchase is intended for both business and private use, determine first the portion that will be used for business, compute for its applicable price, then work out the GST claim based on that price.
Call us to discuss more about the GST, BAS, and tax requirements of your business. We are here to help make your Brisbane bookkeeping, BAS lodging, and business taxation easy, done correctly and on time. We take away the time-consuming and complex part of running a business. So you have time for things that matter to you – like growing the business and spending time with your family.