GST and second-hand goods - completing your activity statement
GST and second-hand goods - completing your activity statement
You can download a printable version of GST and second-hand goods - completing your activity statement (NAT 7392) [367kB] in Portable Document Format (PDF).
Terms we use
When we say:
- purchases we mean the GST term acquisitions
- GST credits we mean the GST term input tax credits
- reporting period we mean the tax period that applies to you
- payment made or received, we mean the GST term consideration
- business we mean the GST term enterprise.
You may use either the accounts method or the calculation worksheet method to complete the relevant GST boxes on your activity statement for the reporting period.
The amounts you report on your activity statement will depend on the accounting basis you have chosen or are otherwise required or permitted to use. You can account on a cash basis or a non-cash basis. Refer to the rules set out in this document when accounting for purchases and sales of second-hand goods using either accounting method.
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You can claim GST credits for your purchases of second-hand goods even if the price you paid did not include GST. You can do this for second-hand goods that you purchase for resale from sellers who do not charge GST in the price of the goods.
There are two ways to calculate these GST credits:
- the direct approach
- the global accounting method.
The system you use depends on whether you sell the second-hand goods as single items, or divide them into separate parts.
You can use the direct approach to calculate and claim GST credits on your purchase of second-hand goods where any of the following apply:
- you resell the second-hand good as a single taxable item
- you divide the second-hand goods up and sell them separately, provided that
- the amount you paid for the second-hand goods was separately itemised
- your division of the goods on resale either corresponds to that itemisation or does not involve further divisions
- you purchased the second-hand goods for $300 or less and you divide the goods for resale.
You cannot use the direct approach if:
- the sale of the second-hand goods to you is taxable or GST-free
- you hire the second-hand goods
- you import the goods
- your subsequent sale or exchange of the goods is not taxable
- you use the global accounting method.
Purchases for $300 or less
If you account on a non-cash basis and you purchase second-hand goods for $300 or less, you can claim the GST credit for the purchase in the reporting period when you first made a payment or received an invoice for the purchase. This does not apply if you choose to claim your credit in the reporting period in which you sell your goods - see 'Purchases for more than $300' below.
If you account on a cash basis, you can claim the GST credit in each of the reporting periods you paid for the purchase.
Report the amount of the GST credit at 1B (GST credits) on your activity statement.
Using the same rules, report amounts for purchases at G11 (non-capital purchases) on your activity statement.
Purchases for more than $300
You must wait until you sell the item you have purchased to claim the GST credit if you paid, or are liable to pay, more than $300 for the second-hand item you purchased. You can also choose to wait until you sell the item before claiming your GST credit even if you pay $300 or less for the second-hand item.
If you account on a non-cash (accruals) basis you can claim the GST credit for the second-hand item you purchased in the reporting period you first:
- receive any part of the payment for the sale of the item
- issue an invoice for the item you sold.
If you account on a cash basis, you can claim the GST credit for the purchase in each reporting period you receive a payment for the sale of the item.
Using the same rules, you report amounts for purchases at G11 (non-capital purchases) on your activity statement.
Report at 1B (GST credits) the lesser of:
- one-eleventh of the amount you paid or are liable to pay to purchase the goods
- the amount of GST in the price of the item when sold.
Report at G11 (non-capital purchases) on your activity statement the lesser of:
- the amount you paid, or are liable to pay, to purchase the goods
- the amount you are due to receive when you resell the goods.
If you use the calculation worksheet method do not report any amount at G14 (acquisitions with no GST in the price).
What records do you have to keep?
In order to claim a GST credit, you must have the appropriate documentation. Although a tax invoice is not required, you must keep a record containing:
- the name and address of the seller of the goods
- a description of the goods (including their quantity)
- the date that you purchased the goods
- the amount you paid for the goods.
Generally, you must use the global accounting method to account for purchases of second-hand goods, if:
- you paid more than $300 for the purchase
- you divide the second-hand purchase into two or more parts before you sell them.
However, you can choose whether or not to use the global accounting method for purchases costing $300 or less.
There is a special rule for certain second-hand goods purchased for $1,000 or less. For more information see What is the special rule regarding purchases of certain second-hand goods for $1,000 or less?.
Do not use the global accounting method where any of the following apply:
- your payment for a batch of second-hand goods is itemised and your division of the goods on resale corresponds to that itemisation
- the sale of the goods to you is GST-free or taxable
- you import the goods
- you hire the goods
- your sale of the goods is not a taxable sale.
How does global accounting work?
When you use the global accounting method, you accumulate GST credits as you purchase eligible items for resale. You cannot claim these GST credits directly at 1B. Instead, use them to cancel out the GST you would otherwise pay to us on the items you sell.
Add your GST credits to any available GST credits that you have carried over from a previous reporting period.
As you subsequently sell the second-hand goods, the amount of your available GST credits is reduced by the GST on the sale, which is 10% of the value of the sale (one-eleventh of the price you charge on the sale). You should only report GST at 1A (GST on sales) on your activity statement when the amount of GST on sales exceeds the amount of available GST credits.
If you use the accounts method to complete your activity statement, report sales and purchases of second-hand goods on your activity statement as follows:
Step 1 Report the amount of sales at G1 (total sales).
Step 2 Report the amount of purchases at G11 (non-capital purchases).
Step 3 Report at 1A (GST on sales) the amount of GST payable on sales of second-hand goods. This is the amount by which the GST on sales exceeds the amount of available GST credits on purchases and carried forward from a previous reporting period (if any).
If the amount of GST credits available exceeds the amount of GST on sales for the goods, do not show any amount related to second-hand goods at 1A (GST on sales) or 1B (GST credits) on your activity statement. The excess GST credits are carried forward to the next reporting period.
You may find the following helpful in calculating your GST liability.
(a) Write sales of goods (at G1)
(b) Divide (a) by 11
(c) Write purchases of goods (at G11)
(d) Divide (c) by 11
(e) Write balance of opening credits
(f) Add (d) and (e)
(g) Take (f) from (b)
If (g) is more than zero, (g) is the GST payable (write at 1A).
If (g) is less than zero, (g) is the balance of credits to be carried over to the next tax period.
If you use the calculation worksheet method, you report sales and purchases of second-hand goods on your activity statement as follows:
Step 1 Report the amount of sales of second-hand goods at G1 (total sales).
Step 2 Report the amount of purchases of second-hand goods at G11 (non-capital purchases).
Step 3 Report at G18 (adjustments on purchases) the amount you reported (if any) at G7 (adjustments on sales) in the previous reporting period.
Step 4 Report at G7 the amount for second-hand goods (if any) that G18 plus G11 exceeds G1. However, if the amount of sales of second-hand goods at G1 exceeds the sum of G18 and G11, do not report any amount at G7.
Step 5 Do not report the amount you put at G11, at G14 (purchases with no GST in the price).
Report at 1A (GST on sales) the amount of GST on sales that exceeds the available GST credits on purchases calculated using the worksheet.
However, if the amount of GST credits available exceeds the amount of GST on sales, do not enter amounts relevant to second-hand goods at 1A (GST on sales) or 1B (GST credits) on your activity statement. The excess GST credits will be carried forward to the next reporting period as you have shown them at G7 under step 4 above.
Where there is an amount of GST to be shown at 1A on the activity statement and you account for GST on a non-cash (accruals) basis, you account for any GST payable in the reporting period in which you first:
- receive any part of the payment for the sale
- issue an invoice for the sale.
If you account for GST on a cash basis, account for any GST to be shown at 1A in the reporting period in which you receive payment, and to the extent of the payment, for the sale.
Example
Scott is a second-hand goods dealer who purchases second-hand goods that are eligible for GST credits under the global accounting method. Scott accounts for GST on a cash basis. Scott also purchases second-hand goods that he divides before selling. Scott uses the global accounting method so that he doesn't have to keep records of what goods have been divided before selling. Scott keeps only one set of records to determine the amount of GST payable at the end of each tax period. He also receives full payment at the time of making each sale.
Scott has the following transactions for the first reporting period:
- purchases of $9,900, of which one-eleventh (that is, $900) is available as GST credits
- sales of $8,800, of which one-eleventh (that is, $800) is GST payable on sales.
Accounts method
At the end of the tax period, Scott works out any GST liability by offsetting his total available credits of $900 against his total GST payable of $800. Scott doesn't have to pay any GST on sales of second-hand goods as his total credits ($900) are more than his total GST payable ($800).
However, Scott is still required to complete and lodge his activity statement showing the purchases and sales for the relevant reporting period.
Scott carries the credit balance of $100 ($900 - $800) over to the next reporting period.
Scott would report the following amounts on his activity statement:
- $8,800 at G1
- $9,900 at G11.
Since the available credits are more than the GST payable on sales, Scott would not report any amount for the sale of second-hand goods at 1A.
Scott would not report any amount for GST credits at 1B.
Calculation worksheet method
Scott reports the following amounts on his calculation worksheet:
- $8,800 at G1
- $9,900 at G11
- $1,100 at G7 = G11 ($9,900) + G18 ($0) - G1 ($8,800).
The amount Scott reports at G7 is the amount Scott will need to report at G18 for the next period.
Scott has no GST or GST credits to report at 1A and 1B.
Scott has the following transactions for the next tax period:
- purchases of $2,200, of which one-eleventh (that is, $200) is added to his available credits, and
- sales of $13,200, of which one-eleventh (that is, $1,200) is GST payable.
Accounts method
Scott has an opening credit balance of $100, carried over from the last reporting period.
At the end of the reporting period, Scott works out any GST liability by offsetting his total credits of $300 (that is, $200 + $100) against his total GST payable on sales of $1,200. Scott has to pay $900 GST as his total GST payable on sales ($1,200) is more than his total available credits ($300). Scott is required to complete and lodge his activity statement showing the purchases and sales for the reporting period, as well as calculating the amount of GST payable.
Scott would report the following amounts on his activity statement:
- $13,200 at G1
- $2,200 at G11.
Since the available credits are less than the GST payable on sales, Scott would report $900 ($1,200 - $300) at 1A.
Scott would not report anything at 1B.
Calculation worksheet method
Scott reports the following amounts on his calculation worksheet:
- $13,200 at G1
- $2,200 at G11
- $1,100 at G18 (carried forward credit of $100 x 11).
Scott does not have to report an amount at G7 as amounts reported at G11 and G18 do not together exceed the amount reported at G1. Accordingly, Scott will not report an amount at G18 in the next reporting period.
After completing the calculation worksheet, Scott will find that the amount he has to report at 1A is $900. Scott would not report anything at 1B.
What is the special rule regarding purchases of certain second-hand goods costing $1,000 or less?
You may choose to use the global accounting method for specified second-hand goods for which you have paid $1,000 or less, even if some or all of the goods were sold to you as a taxable sale.
For more information about second-hand goods, refer to:
To obtain a copy of our publications or for more information:
- phone us on 13 28 66, or
- write to us at
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640
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Last Modified: Thursday, 3 May 2012
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