GST Adjustments
Scenario:
I am running a delivery business which had registered for GST, purchased a car for $33,000 (GST inclusive) on 15, Oct 2011 to use in my delivery business, planned to use the vehicle 90% for business and 10% privately.
The detail of usage as followings:
- 31/6/2013, 80% for business and 20% privately；
- 30/6/2014, 95% for business and 5% privately；
- 01/9/2014, damaged in an accident, was not used for three months and the damages were repaired；
- 30/6/2015, 90% for business and 10% privately；
- 30/6/2016, 92% for business and 8% privately；
- 30/6/2017, 88% for business and 12% privately；
What is the impact of the change in the use of the vehicle on the net amount of GST?
Explanation:
According to GST Act s 129-20(3), The period of time after acquisition in which an adjustment is required depends on the GST- inclusive value of the acquisition and whether or not it relates to business finance. The adjustment periods for an item between $5,001 and $499,999 are five adjustment periods. The vehicle cost was $33,000 (GST= $33,000*1/11= $3,000), the private use is not a creditable purpose.
At the time of purchase, the percentage of business use was estimated at 90 %, the input tax credit would be $2,700 ($3,000*90%)
- For the first adjustment period ending 30/6/2013, business use was 80%, so the increasing adjustment is $300 ($3,000*(90%-80%));
- For the second adjustment period ending 30/6/2014, business use was 95%, so the decreasing adjustment is $150 ($3,000*(95%-90%));
- For the third adjustment period ending 30/6/2015, ignore three- month repair period, business use was 90%, so no change of the adjustment;
- For the fourth adjustment period ending 30/6/2016, business use was 92%, so the decreasing adjustment is $60 ($3,000*(92%-90%));
- For the fifth adjustment period ending 30/6/2017, business use was 88%, so the increasing adjustment is $60 ($3,000*(90%-88%)).
- The overall result after the five adjustment periods is $300-$150 -$60+$60= $150 (an increasing adjustment)
According to the GST Act s 19-75,29-20, An entity must also hold an adjustment note at the time it lodges its tax return for the tax period in which the adjustment is claimed, the adjustment note must be issued by the supplier within 28 days after either receiving a request from the recipient or becoming aware of the adjustment provided that a tax invoice was issued in relation to the original supply.