Quick Summary
When goods or services are used for both business (taxable activity) and private or exempt purposes in New Zealand, you must apportion the GST claimable based on the percentage of business use. This ensures you only claim GST relevant to your taxable activity, with rules varying based on the item's value.
Details
The Principle of GST Apportionment
Many businesses in New Zealand acquire assets or services that are not exclusively used for their taxable activity. In such cases, the GST input tax credit must be apportioned to reflect the actual business use.
- Purpose: To ensure that businesses only claim GST that relates directly to their taxable supplies, and not for private or exempt use.
- Methods of Apportionment:
- Actual Use: This involves tracking the actual percentage of business use versus private/exempt use (e.g., mileage logs for vehicles, time spent on different tasks for equipment).
- Principal Purpose Method: For goods and services $10,000 or less (excluding GST), you can choose this simpler method where you claim based on the item's primary intended use.
- Adjustment Periods: Ongoing adjustments may be required over time if the proportion of business use changes. The frequency and value thresholds for these adjustments were updated from 1 April 2023, reducing the number of adjustments for lower-value items.
- Documentation: Keep clear records supporting your chosen apportionment method and the percentages used.
Source: GST guide (IR375)