You buy something for your business. You see GST on the invoice. So you naturally think: “Great. I can claim that GST back.” But not always.
Just because GST appears on an invoice does not automatically mean you can claim it as a GST credit. There are certain situations where the GST credit is not available. And some of them are surprisingly common.
So before you add that GST amount to your BAS, let’s look at when you can’t claim GST credits.
1. You Are Not Registered for GST
This is the first thing to check. You generally need to be registered for GST to claim GST credits. If you are not registered for GST, you generally cannot claim the GST included in your business purchases.
So if you are a small business that has not registered for GST, don’t assume you can claim GST simply because you have a business expense. GST registration comes first.
2. There Is No GST in the Purchase
This one sounds obvious. But it is easy to miss. If there is no GST included in the price, there is no GST credit to claim.
For example: Purchase price: $500.
GST: $0.
GST credit: $0.
This can happen when you buy a GST-free item. It can also happen when you buy something from a supplier that is not registered for GST and therefore cannot charge GST. You cannot claim GST that you never paid.
3. The Purchase Is for Private Use
This is a big one. You run a business. But you also have a personal life. And sometimes the two overlap. Imagine you buy a television for your home. You have a business. You paid GST. But that does not make the television a business purchase.
If the purchase is private or domestic, you generally cannot claim the GST credit. The important question is: “Why did I buy this?” If the answer is personal use, the GST credit generally isn’t available.
4. The Purchase Is Used for Both Business and Private Purposes
This one is a little different. What if you buy something that is partly for the business and partly for yourself? This happens all the time. Your phone. Your car. Your computer. Even your home internet.
Suppose you buy a phone for: $1,100 including GST.
The GST is: $100.
You use it: 80% for business and 20% privately.
You generally cannot claim the entire $100.
You would generally claim only the business portion: $100 × 80% = $80.
So the potential GST credit is $80, subject to the relevant requirements.
You cannot claim the private portion.
5. The Purchase Relates to Input-Taxed Supplies
This is where GST can get a little more technical. If you make input-taxed supplies, you may not be able to claim GST credits for purchases that relate to those supplies.
Certain residential rental activities and financial supplies are examples of input-taxed activities. For example, suppose you own a residential rental property. You pay GST on a related expense. You cannot automatically claim that GST just because you paid it. You need to consider whether the expense relates to making an input-taxed supply. This is one area where it is worth checking the GST treatment carefully.
6. You Don’t Have the Required Tax Invoice
You bought something for the business. GST was charged. The purchase looks eligible. But there is one problem. You don’t have the required tax invoice.
For purchases over $82.50 including GST, you generally need to hold a valid tax invoice when you lodge your BAS to claim the GST credit. There are exceptions to this rule in certain circumstances.
So don’t just rely on your bank statement. A bank statement can show that you paid $1,100. But it may not contain the information needed to support your GST claim. Keep your tax invoices. It makes life much easier.
7. You Are Claiming GST on Wages
This is another common mistake. You pay your employees. The wages are a business expense. So you might think: “There must be GST on this.” There isn’t. Wages paid to employees do not include GST. Therefore, you cannot claim a GST credit on employee wages.
This is an easy one to remember: No GST on wages = no GST credit.
8. Some Entertainment Expenses Don’t Qualify
You take a client out for dinner. You receive an invoice. GST is included. Can you automatically claim it? No.
Certain entertainment expenses can be restricted for GST purposes. The fact that an expense is related to your business does not automatically mean the GST is claimable. Entertainment expenses can have their own rules and should be checked carefully. So before claiming GST on that expensive dinner, make sure you understand the tax treatment.
9. You Cannot Simply Claim 10% of Every Business Expense
This is probably one of the easiest mistakes to make. You look at your accounts. Total business expenses: $30,000. You think: “I’ll claim 10% GST.”
Unfortunately, it doesn’t work that way. Some expenses may have GST. Some may be GST-free. Some may be private. Some may relate to input-taxed activities. Some may not have GST at all. You need to look at the actual GST included in each eligible purchase.
Let’s Look at a Simple Example
Imagine your business has these expenses: Office equipment: $2,200 including $200 GST.
Advertising: $1,100 including $100 GST.
Employee wages: $5,000 with no GST.
Personal purchase: $1,100 including $100 GST.
GST-free purchase: $500 with no GST.
Assuming the first two purchases are eligible: Office equipment GST credit: $200.
Advertising GST credit: $100.
Wages GST credit: $0.
Personal purchase GST credit: $0.
GST-free purchase GST credit: $0.
Your total GST credit would be: $200 + $100 = $300.
You don’t claim GST simply because money was spent. You claim GST only where the purchase meets the requirements.
What If You Can Claim Only Part of the GST?
This is important when a purchase has mixed use.
Let's say you buy equipment for: $5,500 including GST.
The GST is: $500.
You use the equipment: 60% for business and 40% privately.
You generally cannot claim the full $500.
The business portion would be: $500 × 60% = $300.
So you may be entitled to a $300 GST credit, subject to the relevant requirements.
The private portion stays out of your GST claim.
Don’t Forget the Four-Year Time Limit
There is another situation to keep in mind. You may be entitled to a GST credit but leave it unclaimed. GST credits generally need to be claimed within the applicable four-year time limit.
So don’t let eligible GST credits sit forgotten in your accounting records. Keep your BAS records organised. Review your transactions. And make sure eligible credits are claimed within the required period.
A Simple Checklist
Before claiming a GST credit, ask yourself:
1. Am I registered for GST?
2. Was GST actually included in the purchase?
3. Is the purchase for my business?
4. Is there any private or domestic use?
5. Does the purchase relate to input-taxed supplies?
6. Do I have the required tax invoice or records?
7. Is the expense subject to any special GST rules?
If something doesn't pass these checks, don't automatically claim the GST.
The Bottom Line
GST credits can reduce the amount of GST your business needs to pay. But they are not automatic. You generally can’t claim GST credits when:
- You are not registered for GST.
- There is no GST in the purchase.
- The purchase is private or domestic.
- The purchase relates to input-taxed supplies.
- You don’t have the required records.
- The expense is subject to specific GST restrictions.
And if something is partly business and partly personal, you may only be able to claim the business portion.
So the next time you see GST on an invoice, don’t immediately add it to your BAS. Take a moment. Check the purchase. Check the GST. Check the records. Because “GST was charged” and “GST is claimable” are not always the same thing.