GST Credit Adjustments for Business Use

GST Credit Adjustments for Business Use

How much GST credit you claim on an expense depends on the extent of business use. 

If there is a change of business use, you may have to make an adjustment.  There are adjustment periods that have to be accounted for. 

An adjustment period starts at least 12 months after the end of the reporting period in which you claimed the initial GST credit and ends on 30 June. 

E.g. Expense paid in September 2023 quarter and claimed in September 2023 BAS, the first review period is from 1 October 2024 to 30 June 2025. 

The value of the expense/purchase determines the number of adjustment periods that apply to that transaction. 

For expenses/purchases under $1,000 gst exclusive there are no review periods. 

See the table from ATO webpage for listing of the review periods. 

Table 1: Adjustment periods for most purchases and importations 

Value of the purchase or importation (GST- exclusive) Number of adjustment periods
$1,001 to $5,000 2
$5,001 to $499,999 5
$500,000 or more 10

Cancelling your GST registration also affects the extent of business use, this is a way of stopping businesses of registering for GST solely to claim credits on large purchases then de-registering. 

It is a method of ensuring the integrity of the GST system. 

If you think an adjustment applies to a transaction, please contact us to discuss. 

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