ato logo
Search Suggestion:

Working out your GST credits

Calculate your GST credits using the direct approach or global accounting method.

Last updated 24 May 2017

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 system you use depends on whether you sell the second-hand goods as single items, or divide them into separate parts.

These rules do not apply if the seller charges GST for goods you purchase for resale. Use the special rule for this exception.

See also:

Direct approach

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.

Global accounting method

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.

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.

See also:

How global accounting works

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.