What Is An Input Tax Credit?
WHAT'S AN INPUT TAX CREDIT, AND WHY SHOULD YOU CARE?
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 use and understand, sometimes taking for granted the average person understands them too, which often is not the case at all. Understanding these terms will help you feel more empowered.
WHAT ARE INPUT TAX CREDITS?
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 a GST 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 a GST 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, if you have any burning questions about tax or accounting, no matter how silly you think they might be, contact the Bosco team. We’d love to hear from you to help improve your business.