For a number of people, GST (goods and services tax) is difficult enough to understand in its own right. GST credits are an entirely new realm of taxation to interpret.
Having worked with various small businesses over the years, our team has a great understanding of what GST credits are, and how you can make these credits beneficial to your SME.
Firstly, GST is a 10% charge that is paid on all goods and services sold across Australia (assuming the company selling the product or service has a turnover of $75,000 or more).
Essentially, GST credits (or input tax credits) are a refund/credit for the tax included in the price of your business inputs.
You can claim GST credits if:
- You are registered for GST.
- The purchase you made included GST.
- You are using the purchase for your business, not personal use.
- You made the payment for the purchase.
- You can show a tax invoice from the purchase.
You cannot claim GST credits if:
- You are not registered for GST.
- The purchase did not have GST in the price (it was GST-free).
- You do not have an invoice or proof of payment.
- The purchase was not wholly or partly for business use.
GST credits can get a little confusing when we consider other income tax deductions. If you plan to claim GST credits, you will need to be careful not to include the GST figure in your income tax deduction amount.
Any claims for business purchases in your income tax return should be noted as the amount of purchase less any GST credit to which you are entitled to. Contrastingly to income tax deductions, GST credits must be claimed on your BAS (business activity statement), rather than your annual tax return.
As an example, you may purchase a new printer for the sole purpose of being utilised in your GST-registered business. If you pay $1,100 (including $100 GST) for the printer, then you can claim a GST credit of $100 on your BAS. You are also entitled to claim the decline in value of the printer on your income tax return.
Most small businesses find it easier to work with experienced accountants and bookkeepers to assist them with their taxation obligations. Not only will the team at Paris Financial meet your legal tax requirements, but they will ensure you get the greatest return possible in all areas, including GST credits.
Contact us today if you would like to book in for a free initial consultation with any of our tax champions.