Quick Summary
To calculate actual use for GST adjustments in New Zealand, businesses must maintain accurate records that demonstrate the proportion of an asset's use for taxable activities versus private or exempt purposes. This often involves detailed logs or reasonable estimates supported by evidence, which then informs the percentage of GST claimable or adjustable.
Details
Determining Actual Use for GST Apportionment
For many mixed-use assets, particularly those over the $10,000 (excluding GST) threshold, accurately calculating the 'actual use' for your taxable activity is essential for making correct GST adjustments.
- Importance: The accuracy of your GST claims and adjustments directly depends on how well you can substantiate the percentage of an asset's use in generating taxable supplies.
- Methods of Calculation: There isn't a single prescriptive method, but generally, it involves:
- Maintaining Records: Keeping detailed logs (e.g., mileage logs for vehicles, time sheets for equipment, usage data for software).
- Reasonable Estimates: In cases where precise tracking is impractical, making a reasonable and justifiable estimate based on the nature of the asset and your business operations. This estimate must be supported by evidence.
- Review and Adjustment: Periodically reviewing this actual use (e.g., annually) and making adjustments if the proportion of taxable use changes significantly.
- IRD Guidance: The Inland Revenue Department (IRD) expects businesses to use methods that provide a fair and reasonable reflection of actual use.
Source: GST guide (IR375)