When you claim a GST credit on your BAS it’s important to understand how this impacts deductions on your income tax return.
If you’re registered for GST and want to claim a deduction for a business purchase in your tax return, make sure you only claim the GST exclusive cost of the item (for example, the amount you paid minus GST). You do not include the GST paid as you can claim this as a credit on your BAS.
Consider the following examples.
Muhammad is a builder and has recently upgraded some of his tools. The cost of the new tools are $1,650 which includes $150 GST. Muhammad is registered for GST and claims a $150 GST credit on his quarterly BAS. At the end of the financial year, Muhammad claims a business deduction on his income tax return of $1,500 for the tools. Muhammad isn’t entitled to claim a business deduction of $1,650 as he has already claimed the GST component of $150 GST on his BAS.
If you're not entitled to claim a GST credit for your business purchase, then you can claim the full cost of the goods or services, including GST, as a deduction.
John sells pottery at local markets. He purchases a portable credit card and EFTPOS machine for $65 (including $5.91 GST) to assist him with sales. John is not registered or required to register for GST and is therefore not able to claim a credit for the $5.91 GST paid. Instead, John can claim the full price of $65 as a business tax deduction on his income tax return.
Remember that the ATO is there to assist you with any questions you might have. If you’re uncertain about something, you can access their Live chat service or give them a call.
