What Is An Input Tax Credit?


Recently someone asked us “Hey Bosco, what’s an input tax credit?” – we said “great question, here’s the answer…”.

Then it got us to thinking – JARGON! There’s loads of phrases accountants understand and can sometimes take for granted that you don’t. Input tax credits are a perfect example.

If you run a small business then understanding input tax credits is important. So (drum roll)… an input tax credit is also known as a GST credit. Basically, it’s a credit you can claim for the amount of GST included in the price of goods or services you buy to use in your business.

These are a few useful things to know about input tax credits:

  • You can only claim an input tax credit if you are registered for GST.
  • Not everything will have GST included in the price, for example if you buy fresh vegetables to use in your restaurant, these would be GST-free sales to you.
  • You can find the amount of GST on the tax invoices issued to you.
  • If you buy an item for both business and private purposes, you can only claim an input tax credit for the business portion.
  • You can’t claim an input tax credit on items you buy to make input-tax sales. For example if you rent out residential premises you cannot claim credits on repairs and maintenance.
  • You need to keep your tax invoice for purchases that cost more than $82.50 (including GST).

We understand that the only silly question is the one you don’t ask! So (just like input tax credits), if you have any burning questions, no matter how silly you think they might be, get in touch. We’d love to hear from you to help improve your business.