Claiming GST on your business costs is an area that can be slightly confusing, especially if the goods are secondhand, or purchased from someone who is not GST-registered.
Some people think buying secondhand might only apply to a bargain-hunting consumer, but businesses these days will buy secondhand vehicles, computers andmachinery from a combination of businesses and private suppliers.
Price may be a deciding factor in the decision to buy secondhand. A private seller has fewer costs to recover, ie, no business overheads such as rent, wages and profit to factor in and no GST to add on to the sale.
For the purchaser, knowing that there may be 3/23rd of the cost to recover from a GST claim without having to pay it also adds appeal.
If you are GST-registered and buy secondhand goods from someone who is not registered for GST you can claim GST inputs as long as you have made the payment before you claim for them in your GST return.
There are a few details that you will need to keep, such as the seller's name and address, the date of purchase, a description of the goods, quantity and the price you paid for them.
That's okay. That's straightforward, but what if you are buying the goods from yourself? The classic example is a vehicle being purchased by your company from yourself as an individual.
Dealings between entities that have a close relationship like this are called associated persons transactions.
If you, the individual, bought your car from a dealer that was registered for GST then you on-sell it to your company, your company can have the GST claim at the lesser of the car's cost or market value.
If you, the individual, bought your car from an unregistered person then you can't have the GST claim on the transfer/sale to your company. These are the rules.
If you've bought land and will farm it and claim GST be aware of the above associated persons rules, especially when there may be transfers from relationship property settlements. They might mean no GST credits when it's claim time.
