How to Claim GST on Business Expenses
What are GST Credits?
GST credits (also called input tax credits) allow you to claim back the GST you've paid on business expenses. When you lodge your Business Activity Statement (BAS), you report these credits in field 1B, which reduces the amount of GST you owe to the ATO.
For example, if you collected $1,100 GST from customers but paid $220 GST on business expenses, you only owe the ATO $880 ($1,100 - $220).
💡 Key Point: You can only claim GST credits if you're registered for GST and the expense was for your business.
Eligible Business Expenses
You can claim GST credits on most business purchases, including:
- Office Supplies: Stationery, printer ink, computer equipment
- Phone & Internet: Business phone plans, internet service, data
- Vehicle Expenses: Fuel, maintenance, registration (for business use)
- Software & Subscriptions: Accounting software, cloud storage, productivity tools
- Professional Services: Accountant fees, legal advice, consulting
- Travel & Accommodation: Business trips, conference tickets, hotels
- Tools & Equipment: Machinery, tools, furniture, fixtures
What You Cannot Claim
Not all expenses are eligible for GST credits:
- Personal Expenses: Non-business purchases, even if made by the business
- GST-Free Items: Basic groceries, most medical services, education
- Input-Taxed Supplies: Residential rent, financial services, precious metals
- Private Use Portion: If an expense is partly personal, only claim the business portion
💡 Special Rule: For purchases under $82.50 (including GST), you don't need a tax invoice, but you still need proof of purchase (e.g., a receipt).
Record-Keeping Requirements
To claim GST credits, you must keep proper records:
1. Tax Invoices (Over $82.50)
A valid tax invoice must include: the word "Tax Invoice", seller's ABN, date, description of goods/services, GST amount (or "includes GST"), and total amount.
2. Retention Period (5 Years)
Keep all invoices and receipts for at least 5 years from the date you lodge your BAS. Digital copies are acceptable.
3. Digital Record-Keeping
Use receipt scanning apps or accounting software to automatically capture and store receipts. This saves time and ensures you never lose a receipt.
How to Calculate GST Credits
GST in Australia is 10% of the pre-GST price. To extract the GST from a GST-inclusive price, use the 1/11th rule:
GST Credit = Total Price ÷ 11
Example 1: You pay $110 for office supplies.
GST Credit = $110 ÷ 11 = $10
Example 2: You pay $550 for a business phone.
GST Credit = $550 ÷ 11 = $50
If the invoice shows the GST separately, just use that amount. No calculation needed!
Tips for Maximising GST Credits
- 1. Capture Every Receipt: Use a mobile app to snap photos of receipts immediately after purchase. Small expenses add up quickly.
- 2. Separate Business and Personal: Use a dedicated business bank account and credit card to make record-keeping easier.
- 3. Review Expenses Quarterly: Before lodging your BAS, review all expenses to ensure you're claiming everything eligible.
- 4. Claim Partial Business Use: For items used partly for business (e.g., home internet), calculate the business percentage and claim that portion.
- 5. Automate Where Possible: Link your bank account to accounting software to automatically import and categorise expenses.
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