GST apportionment and adjustment

GST apportionment has been around for a long time, but it has changed over the years.

You can claim input tax deductions on purchases of goods and services you use to make taxable supplies. Where assets are used both to make taxable supplies and for private use, you can only deduct a percentage of the total input tax deduction, based on an estimate of the percentage of taxable use. This is known as apportionment and ensures GST is collected on the asset’s non-taxable use. An example would be a van delivering packages during the week and used privately in the weekend.

If actual use of the asset changes, you must account for this in your GST return at the end of each adjustment period. This is known as an adjustment or change in use.

This has been complex and time-consuming for businesses to manage. Changes introduced from 1 April 2023 are intended to reduce compliance costs on GST apportionment and adjustment for businesses.

If we do your GST returns, you’ll need to provide records substantiating taxable vs private use. It would also be advisable to review assets not principally used in making taxable supplies.

If you do your own GST returns, review assets with a private or exempt element of usage to see how the new rules apply. Consider the new rules when purchasing assets where there will be a mix of taxable and private or exempt usage.

Be aware that more changes are on the way, and if you have queries please get in touch.