Allocate GST credits across taxable and input-taxed sales

Use this worksheet when one purchase supports activities with different GST treatment. It doesn't decide whether a particular rental, financial service or sale is input taxed in the first place.

Separate GST-free and input-taxed activities

A GST-free sale and an input-taxed sale can both have no GST charged to the customer, yet the treatment of related purchase credits differs. Purchases supporting input-taxed supplies generally don't have the same credit entitlement as purchases supporting taxable or GST-free business sales.

The GST-code guide introduces those categories. Here the task is to allocate one cost that supports activities with different treatment. "It's a business expense" doesn't finish that analysis.

Allocate specific costs before splitting overheads

Start with the invoice lines and engagement scope. A fee solely for one activity may be directly attributable to that activity. A combined invoice could contain separate pieces of work that can be traced using a time record. Only genuinely shared costs need a shared basis.

The ATO's GSTR 2006/4, particularly its apportionment discussion, requires a method that reflects intended or actual use and is fair and reasonable in the circumstances. A turnover percentage may be suitable in some cases and misleading in others. A large one-off asset sale, for instance, could distort a revenue-based split without changing how an office is used.

Work through a documented shared fee

Fictional example: a valid $1,100 tax invoice contains $100 GST. It covers bookkeeping work for two activities within one entity. The example assumes the GST classifications have been confirmed, no special exception applies and contemporaneous task records fairly reflect the services received. Seventy per cent of the work supports taxable sales and 30% supports input-taxed residential rental activity.

Use of the service	Evidence	Gross cost share	Illustrative GST credit
Taxable trading activity	7 of 10 recorded work hours	$770	$70
Input-taxed activity	3 of 10 recorded work hours	$330	$0 under the stated assumptions
Total invoice	10 documented hours	$1,100	$70 of $100 GST
Amount not recovered as GST	Input-taxed activity share	Accounting treatment to confirm	$30

Calculation: $100 × 70% = $70. A time split is used only because this example assumes it fairly measures the service provided. Original ASBG worksheet; all example figures are fictional.

The unrecovered $30 doesn't simply vanish. Ask the accountant how it is included in the relevant cost, taking account of the nature of the purchase. An income-tax deduction is a separate question from a GST credit.

Make the basis reproducible

Keep the supplier invoice, description of the activities, direct allocations, calculation and underlying record. State why the selected measure reflects this purchase. If the basis is floor area, show the areas and use; if it is staff time, show the task records and period covered.

Write down why plausible alternatives were rejected. "Used 70% last year" doesn't explain this year's usage. Record an intended review date and the change that would trigger an earlier review, such as closing a service line or changing the use of premises.

Identify cases the simple worksheet cannot settle

Financial supplies have specific provisions, including the financial acquisitions threshold and reduced input tax credits. Borrowing-related costs can also need separate treatment. You can't assume that every bank-related expense or every mixed activity uses the basic 70/30 calculation above. The ATO credit guidance and relevant rulings need to be applied to the actual acquisition.

Changes between intended and actual use can lead to later GST adjustments. Keep the original allocation even if the percentage later changes; it explains the credit originally claimed. Your agent should determine whether an adjustment is required, when it is reported and how it is calculated.

Continue with the next question

• GST on overseas software: check the subscription invoice
• Unexpected BAS refund? Check the figures before lodging

Key takeaways

• Trace directly attributable costs before apportioning shared ones.
• Use evidence that measures the particular purchase's use.
• Check special rules and later changes before treating the worksheet as a claim.

Where to get help

Ask a registered tax agent with experience in your activities to review the allocation and exceptions. Start with GSTR 2006/4; return to Bookkeeping and BAS for related reporting guides.