Goods and Services Tax is imposed on goods and services in many countries. It is used to simplify the taxation system. If you produce a gross annual income of $75,000 or more, then you must register for GST. As a result, you have to complete monthly, quarterly, or annual BAS and file it with the ATO. Moreover, you will learn more about GST credits from this blog.
What is a GST Credit?
Businesses in Australia collect GST from their customers, while they pay GST on things purchased for their business. To avoid paying tax on the same thing multiple times, businesses can claim back some of that GST as credits. This is like getting a refund for the tax you’ve already paid. It’s an important aspect of financial management for business owners as it helps them save money, manage their finances better, and stay competitive in the market. If you find it difficult to understand all tax matters, then you can seek help from an accountant. You can also find someone near your area by searching ‘tax accountant near me’.
When You Can Claim a GST Credit?
You are allowed to claim a credit for any GST in the price you pay for goods and services you use in your business. It is called an input tax credit or a GST credit. To be eligible to claim GST credits in your Business Activity Statement, you should be registered for GST. You can claim GST credits if you meet the following conditions:
• you use your purchase solely or partly for your business and those things aren’t related to making input-taxed supplies
• the purchase price includes GST
• you pay or are subject to pay for the item you bought
• you have a tax invoice from your supplier (for purchases above $82.50).
When you claim GST Credits, ensure your suppliers are registered for GST. You can reach out to a professional tax return accountant to understand GST credit and how you can claim GST credits.
When You Can’t Claim a GST Credit?
You are not eligible to claim GST Credit if:
• if you are not registered for Good and Services Tax (GST)
• for things that don’t have GST in the price, including
◦ where the sale to you is GST-free
◦ where the sale to you is input-taxed
◦ purchases from suppliers who are not registered for GST
• for salary or wages you pay to staff
• if you don’t have a valid tax invoice for goods that cost above $82.50 when you file your activity statement.
How to Maximise GST Credits?
Maximising GST credits requires businesses to follow specific guidelines and adopt a strategic approach. To begin with, businesses must register for Goods and Services Tax with the Australian Taxation Office (ATO) if their annual turnover exceeds the registration threshold.
Maintaining detailed records of expenses of a business and purchases is crucial. These records should include tax invoices and receipts, which clearly show the supplier’s ABN, a description of goods or services, transaction date, total amount paid, and GST amount. Accurate record-keeping is crucial for supporting GST credit claims. Accountants in Melbourne can help you maximise GST credits.
• Claim Input Tax Credits
Check out business-related expenses that include GST and claim input tax credits on BAS. It includes GST paid on purchases of capital assets, goods and services used in business operations.
• Fuel Tax Credits
Businesses that use fuel for eligible activities, such as vehicles or operating machinery, may be eligible for fuel tax credits. Accurate records of fuel purchases and usage are crucial to calculate the credits.
• Luxury Car Tax Credits
The luxury car tax is imposed on the purchase of luxury cars with a value above a certain threshold. To claim luxury car tax credits, it is not important to be registered for GST. However, certain conditions must be met.
Conclusion
Now that you know when you can claim GST credit and when you can’t, along with different ways to maximise GST credits. You can also receive help to take care of these matters by reaching out to Reliable Melbourne Accountants.
