Input Tax Credit in Australia – What It Is, How It Works, and How to Claim It

An input tax credit allows GST-registered businesses in Australia to claim back the GST paid on goods or services used for business operations. This credit reduces the amount of GST you owe the ATO when lodging your BAS.

At Ozobooks, we help businesses correctly track and claim input tax credits to ensure compliance and minimise overpayment of tax.

What Is an Input Tax Credit?

When your business buys goods or services and pays GST, you’re entitled to a credit for that GST — provided:

• The goods/services are for business use
• The supplier is registered for GST
• You hold a valid tax invoice

This is known as an input tax credit, and it directly offsets your GST liability.

Example:

Your business buys $1,100 worth of computer equipment (including $100 GST). You can claim that $100 as an input tax credit. If you collected $300 GST from your own sales, you only need to pay $200 to the ATO.

What Can You Claim?

You can claim GST credits on:

• Office supplies and inventory
• Business-related travel expenses
• Equipment and software
• Rent and utilities (if GST included)

You cannot claim GST credits on:

• Entertainment expenses
• Private purchases
• Goods/services for input-taxed sales (like financial services)

Claim Requirements

To claim input tax credits, you must:

• Be registered for GST
• Use the purchase for business purposes
• Hold a valid tax invoice for purchases over $82.50
• Report the purchase on your BAS in the correct period

Common Mistakes to Avoid

❌ Claiming GST without a tax invoice
❌ Claiming GST on non-business or private expenses
❌ Including GST-free items (e.g. milk, medical services) in credit claims
❌ Missing credits by not reconciling expenses properly

Ozobooks Can Help With:

• Identifying eligible GST credits
• Organising supplier invoices
• Setting up systems to track input tax credits
• Reconciling credits before BAS submission
• Fixing past BAS errors or missed claims

FAQ:

Q1: Can I claim GST on purchases made before I registered for GST?
Yes, in some cases you can backdate claims for up to 4 years if you have proper records. We can assess this for you.

Q2: Do all purchases include GST?
No. Some items like medical supplies or basic food are GST-free. Always check your tax invoices.

Q3: What if I made a mistake claiming a credit?
You can correct it in your next BAS or amend a past BAS. We help fix ATO errors without stress.

Q4: What records do I need to keep?
Keep copies of tax invoices, receipts, and reconciliations for at least 5 years in case of ATO audit.