Input Tax Credits: What You Can (and Can't) Claim
A practical guide to claiming GST credits on business purchases in Australia — which expenses qualify, which are blocked, how to apportion mixed-use items, and how to report credits correctly on your BAS.
In this guide
- 1. The four eligibility tests
- 2. What you can claim
- 3. What you can't claim
- 4. Entertainment — the tricky one
- 5. Tax invoice requirements
- 6. Apportionment for mixed use
- 7. The car limit
- 8. Reporting credits on your BAS
- 9. Adjustments when use changes
- 10. The 4-year time limit
- 11. Common mistakes & ATO audit triggers
- 12. FAQs
Input tax credits — at a glance
- What they are: GST you paid on business purchases, claimed back via your BAS
- Who can claim: Only GST-registered businesses and organisations
- Tax invoice threshold: Required for purchases over $82.50 inc GST
- Car limit (2025-26): $69,674 — max GST credit of $6,334
- Time limit: 4 years from the due date of the BAS in which you could have first claimed
- BAS label: Report at 1B (GST on purchases), calculated from G10 + G11
- Key exclusions: Wages, bank fees, residential rent, most employee entertainment
The four eligibility tests
Before you can claim a GST credit on any purchase, it must pass all four of these tests. If any one fails, you can't claim the credit — even if the invoice shows GST.
You're registered for GST
You must be registered for GST at the time you lodge the BAS claiming the credit. Unregistered businesses cannot claim input tax credits — the GST included in their purchases is simply a cost.
The purchase was for a creditable purpose
The purchase must relate to making taxable or GST-free sales. If it's for making input taxed sales (like residential rental income) or for private use, it fails this test. Mixed-use purchases get a partial credit.
The supplier charged GST
The supply must be a taxable supply — meaning the supplier is GST-registered and charged GST. You can't claim credits on GST-free supplies (no GST was charged), input taxed supplies, or purchases from unregistered suppliers.
You hold a valid tax invoice
For purchases over $82.50 (inc GST), you must hold a tax invoice that meets ATO requirements before lodging the BAS. For purchases of $82.50 or less, alternative evidence (bank statement, EFTPOS receipt) is accepted.
ATO Reference
When you can claim a GST credit
The ATO's detailed explanation of the conditions that must be met for a creditable acquisition.
View on ATO websiteWhat you can claim
If a purchase passes all four tests above, you can claim the GST component as an input tax credit. Here are the most common categories of creditable business purchases:
| Category | Common examples | Watch out for |
|---|---|---|
| Office & admin | Rent (commercial), electricity, internet, phone plans, stationery, postage | Residential rent is input taxed — no credit |
| Professional services | Accounting fees, legal fees, marketing, web hosting, SaaS subscriptions | Must be for business use and supplier must be GST-registered |
| Equipment & tools | Computers, machinery, tools, furniture, fit-out costs | Capital items go on BAS label G10; report at 1B for the GST credit |
| Motor vehicles | Cars, utes, vans — purchase price, fuel, servicing, insurance | Cars capped at the car limit ($69,674 for 2025-26). Utes/vans uncapped. |
| Stock & materials | Raw materials, goods for resale, packaging, freight | Full credit if entirely for taxable sales |
| Travel & accommodation | Flights, hotels, taxis, Uber — for business travel | Domestic flights are GST-free (no GST to claim). Hotels include GST. |
| Training & conferences | Industry courses, professional development, conference registrations | GST-free education (e.g. accredited courses) has no GST to claim |
What this means for you
For a small business spending $8,000/month on GST-inclusive operating expenses
~$727/month in GST credits
That's roughly $8,727 per year claimed back from the ATO through your BAS — money that flows straight back into your business.
Try it yourself
Enter your business purchase amount to see exactly how much GST you can claim back.
Calculate your GST creditWhat you can't claim
These are the most common expenses that business owners incorrectly try to claim GST credits on. Some have no GST to begin with. Others have GST but the credit is specifically blocked.
| Expense | Why you can't claim |
|---|---|
Wages & salaries | Not a taxable supply — GST does not apply to employment |
Bank fees, loan interest & merchant fees | Financial supplies are input taxed — the bank doesn't charge you GST |
Residential rent (paid or received) | Input taxed supply — no GST charged, no credit available |
Life insurance premiums | Input taxed financial supply |
Stamp duty, council rates, land tax | Government charges — not subject to GST |
Donations & sponsorships (without a supply) | No taxable supply received in return — not a creditable acquisition |
Private or domestic purchases | Only business-use purchases are creditable — personal use gets no credit |
Purchases from non-GST-registered suppliers | No GST was charged, so there is nothing to claim back |
Entertainment (meals, events, tickets for employees/associates) | Blocked under Division 69 — even if GST was charged, the credit is denied for most entertainment |
Common trap: bank fees
Many business owners assume bank fees include GST because they appear on business statements. Most bank fees, merchant terminal fees, and loan interest are input taxed financial supplies — no GST is charged, so there is nothing to claim. Check your bank statement carefully: if there's no GST shown on the fee, it's input taxed.
ATO Reference
When you cannot claim a GST credit
The ATO's list of purchases and situations where GST credits are denied.
View on ATO websiteEntertainment — the tricky one
Entertainment expenses cause more GST credit errors than almost any other category. The rule under Division 69 of the GST Act is: if the entertainment is provided to employees or their associates, the GST credit is blocked — even when the expense itself includes GST and is otherwise a legitimate business cost. The exception is entertainment provided to clients (where no employees benefit).
| Scenario | GST credit? | FBT applies? | Notes |
|---|---|---|---|
| Team lunch at a restaurant (employees only) | Possibly | Blocked entertainment — no GST credit regardless of FBT position | |
| Client lunch (no employees attend) | No | Not subject to FBT, so the block in Div 69 doesn't apply | |
| Christmas party (all staff, on premises) | Exempt if < $300/head | Entertainment block applies to the GST credit | |
| Working lunch — sandwiches in the boardroom | No | Light refreshments during work aren't entertainment | |
| Sporting event tickets for a client | No | Client entertainment — credit available, no FBT | |
| Sporting event tickets for an employee | Yes | Employee entertainment — GST credit blocked under Div 69 |
The "light refreshments" exception
Tea, coffee, biscuits, fruit, and simple sandwiches provided during the work day are not treated as entertainment by the ATO. You can claim the full GST credit on these items. The line between "light refreshments" and "entertainment" is roughly: if it's food that could be provided at a restaurant or function, it's entertainment. If it's sustenance for working, it's not.
Tax invoice requirements
A valid tax invoice is your proof of entitlement to claim a GST credit. Without one, the ATO can disallow your claim during a review. Here's what a tax invoice must contain:
| Required information | Sales < $1,000 | Sales ≥ $1,000 |
|---|---|---|
| Seller identified as the supplier | ||
| Seller's ABN | ||
| Date of issue | ||
| Description of items supplied | ||
| GST amount (or statement that total includes GST) | ||
| Total price including GST | ||
| Buyer's identity or ABN | — | |
| Quantity of each item sold | — |
Under $82.50 (inc GST)
No tax invoice needed. You can claim based on a cash register receipt, EFTPOS slip, or bank statement — as long as it shows the supplier, date, amount, and that GST was included.
$82.50 and over (inc GST)
A valid tax invoice is mandatory. If your supplier hasn't provided one, you have the right to request one and they must provide it within 28 days. Claim the credit once you hold the invoice.
ATO Reference
GSTR 2013/1
Tax invoices
ATO requirements for issuing and holding tax invoices, including what makes an invoice valid.
View on ATO websiteApportionment for mixed use
When a purchase is used partly for business and partly for private purposes — or partly for making taxable sales and partly for input taxed sales — you can only claim the business/taxable portion. The ATO requires you to use a "fair and reasonable" method to determine the split.
| Item | Total GST | Business use | GST you can claim |
|---|---|---|---|
Car used 70% for business Car at 2025-26 limit of $69,674 | $6,334 | 70% | $4,434 |
Laptop used 80% for business $2,200 inc GST laptop | $200 | 80% | $160 |
Home internet — 40% business $99/month inc GST plan | $9 | 40% | $3.60 |
Mobile phone — 60% business $80/month inc GST plan | $7.27 | 60% | $4.36 |
Common apportionment methods
- Time-based: Hours used for business vs personal (good for equipment, phones, internet)
- Floor space: Business area vs total area (good for home office expenses)
- Kilometre/logbook: Business km vs total km (used for motor vehicles — a logbook kept for 12 continuous weeks is valid for 5 years)
- Revenue-based: Taxable revenue vs total revenue including input taxed (used by businesses making mixed supplies like financial services)
Tip: keep it simple and documented
The ATO doesn't prescribe a specific method — it just needs to be "fair and reasonable" and you need to be able to explain it. A simple spreadsheet tracking business vs personal use is usually enough. The key is consistency: use the same method each BAS period unless your circumstances change.
ATO Reference
GSTR 2006/4
Apportionment of input tax credits
ATO guidance on determining the extent of creditable purpose for mixed-use acquisitions.
View on ATO websiteThe car limit
There's a special cap on GST credits for passenger vehicles. For the 2025-26 financial year, the car limit is $69,674. This means the maximum GST credit you can claim is:
$69,674 ÷ 11 = $6,334 maximum GST credit
This applies regardless of what you actually paid. If you buy a $110,000 car, the GST component is $10,000 — but you can only claim $6,334.
Worked example: buying a $88,000 car used 75% for business
| Step | Amount |
|---|---|
| Purchase price (inc GST) | $88,000 |
| GST in purchase price ($88,000 ÷ 11) | $8,000 |
| Car limit cap ($69,674 ÷ 11) | $6,334 |
| Business use percentage | 75% |
| GST credit you can claim ($6,334 × 75%) | $4,751 |
The $8,000 in actual GST is irrelevant — the car limit caps it at $6,334, then the 75% business use further reduces it to $4,751.
What counts as a "car"?
The car limit applies to motor vehicles designed to carry fewer than 9 passengers (including the driver) and a load of less than 1 tonne. This covers:
Subject to car limit
- Sedans, hatchbacks, wagons
- SUVs (including large ones)
- Sports cars
- Most dual-cab utes (payload < 1 tonne)
NOT subject to car limit
- Single-cab utes (payload ≥ 1 tonne)
- Dual-cab utes (payload ≥ 1 tonne)
- Vans (e.g. HiAce, Transit)
- Trucks, buses (9+ passengers)
What this means for you
Buying a $75,000 Toyota HiLux SR5 dual-cab (payload 1,005 kg)
Full $6,818 GST credit available
Because the payload exceeds 1 tonne, the car limit doesn't apply — you can claim the full 1/11th of the purchase price as a GST credit (assuming 100% business use).
Reporting credits on your BAS
Your input tax credits are reported through three BAS labels. Getting these right is the difference between an accurate BAS and a correction notice from the ATO.
| Label | What it covers | How to calculate |
|---|---|---|
G10 | Capital purchases (equipment, vehicles, fit-out) | Total value of capital purchases for the period (GST-exclusive if accrual method) |
G11 | Non-capital purchases (rent, utilities, stock, services) | Total value of operating purchases for the period (GST-exclusive if accrual method) |
1B | GST on purchases — your input tax credit | Calculated automatically: 1/11th of (G10 + G11). This is the amount credited against GST collected on sales (1A). |
Worked example: quarterly BAS with capital and operating purchases
A graphic design business had these purchases in Q3 (Jan–Mar 2026):
- New iMac: $3,300 inc GST (capital purchase)
- Adobe Creative Cloud: $660 inc GST (non-capital)
- Office rent: $6,600 inc GST (non-capital)
- Stationery & printing: $440 inc GST (non-capital)
| BAS label | Amount (ex GST) |
|---|---|
| G10 (capital purchases): $3,300 ÷ 1.1 | $3,000 |
| G11 (non-capital): ($660 + $6,600 + $440) ÷ 1.1 | $7,000 |
| 1B (GST credit): ($3,000 + $7,000) ÷ 10 | $1,000 |
The $1,000 at 1B is subtracted from the GST collected on sales (1A). If 1B exceeds 1A, the ATO refunds the difference.
BAS Estimator
Enter your quarterly sales and purchases to estimate your net GST payable or refund.
Adjustments when use changes
If you claimed a GST credit based on planned business use, but your actual use turns out to be different, Division 129 of the GST Act requires you to make an adjustment. This works both ways:
Increasing adjustment
You claimed too much — actual business use is lower than planned. You owe the ATO the difference.
Example: You claimed 80% business use on a laptop but actually use it 50% for business. You must repay the GST credit on the 30% difference.
Decreasing adjustment
You claimed too little — actual business use is higher than planned. The ATO owes you the difference.
Example: You claimed 50% on your car but a logbook shows 70% business use. You can claim an additional credit for the 20% difference.
When to check
Adjustments are calculated at the end of each adjustment period — which is the tax period that includes 30 June each year (or the closest tax period to it). The first adjustment period starts at least 12 months after you claimed the original credit. Review your business-use percentages annually.
The 4-year time limit
You have 4 years from the due date of the earliest BAS in which you could have claimed the credit. After that, the credit expires permanently — the ATO cannot amend your assessment to include it, even if you ask.
Example: when a credit expires
You bought a $5,500 (inc GST) printer in August 2022. The GST credit of $500 could first be claimed on your Q1 2022-23 BAS (Jul–Sep 2022), which was due 28 October 2022.
The 4-year deadline is 28 October 2026. If you haven't claimed it by then — on the original BAS or a later one — you lose it.
Tip: review old BAS returns regularly
Many businesses miss credits on purchases where the invoice arrives late, or where GST was incorrectly coded as GST-free in accounting software. A quarterly or annual review of your GST coding can recover thousands in missed credits — as long as you're within the 4-year window.
ATO Reference
Time limits on GST credits and refunds
ATO guidance on the 4-year credit time limit, including when the clock starts and what happens if you miss it.
View on ATO websiteCommon mistakes & ATO audit triggers
The ATO uses data matching and automated risk profiling to flag BAS returns with unusual GST credit claims. Here are the mistakes that most commonly trigger a review:
1. Claiming GST on purchases that don't include GST
The single most common error. Business owners see a $100 expense and claim $9.09 in GST, without checking whether the supplier actually charged GST. Bank fees, insurance, government charges, and purchases from small unregistered suppliers often don't include GST. Always check the invoice.
2. Credits that exceed sales — GST refund every quarter
While refunds are legitimate (e.g. during a start-up phase or a major capital purchase), consistently claiming more credits than GST collected is a red flag. The ATO may ask you to substantiate your claims. Ensure every credit is backed by a valid tax invoice.
3. Not apportioning private use
Claiming 100% GST credits on a vehicle, phone, or internet plan that's clearly used partly for personal purposes is an easy target for the ATO. If you can't produce a logbook or usage diary showing business percentage, the ATO may apply its own (lower) estimate.
4. Claiming on entertainment without checking the rules
Employee meals, Christmas parties, and event tickets are commonly claimed as GST credits when the credit is actually blocked. Review the entertainment rules above.
5. Missing the car limit
Claiming the full GST on a $100,000+ vehicle without applying the car limit. Your accounting software may not automatically cap this — it's worth checking manually whenever you purchase a vehicle above the threshold.
6. No tax invoice for purchases over $82.50
If you claim a GST credit and the ATO asks for the tax invoice during a review, you need to produce it. "I'll get it from the supplier" isn't enough — you should hold the invoice before lodging the BAS. Build a habit of requesting tax invoices at the time of purchase.
Voluntary disclosure reduces penalties
If you discover you've overclaimed GST credits, voluntarily disclosing the error to the ATO — rather than waiting for an audit — significantly reduces penalties. For net GST errors under $10,000, you can correct the mistake on your next BAS. For larger errors, use the ATO's voluntary disclosure process.
Not sure if you can claim a GST credit?
Our eligibility checker walks you through the four tests step by step. Answer a few questions about your purchase and get a clear yes/no answer — with the ATO rules behind it.
Check eligibility now →Frequently asked questions
Related guides
How to Calculate GST in Australia
The three GST formulas, worked examples, and BAS reporting basics.
GST-Free Items in Australia
Full list of goods and services exempt from GST, with examples and edge cases.
GST Registration Threshold
When you must register, how the $75K threshold works, and voluntary registration pros and cons.
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