One of the key benefits of GST registration is the ability to claim back the GST included in your business expenses. These are called input tax credits, and they reduce the net GST you owe to IRD.
You can claim back the 15% GST on any business expense, provided the supplier was GST-registered and you hold a valid tax invoice (for amounts over $50). If an expense is partly personal and partly business, you can only claim the business proportion. Common claimable items: equipment, software, office rent, internet, phone (business portion), professional fees. You cannot claim on private expenses, residential rent paid, or from non-GST-registered suppliers.
What Is an Input Tax Credit?
An input tax credit (ITC) is a credit for the GST included in the price of a business purchase. When you buy something for your business from a GST-registered supplier, the price includes 15% GST. You can claim that GST back, reducing your net GST liability.
Formula: Net GST payable = Output tax (GST on your sales) − Input tax credits (GST on your purchases)
What You Can Claim
You can claim input tax credits on purchases that are used for making taxable supplies:
| Claimable expenses | Notes |
|---|---|
| Office rent | Commercial premises — not residential |
| Equipment and tools | Computers, machinery, trade tools |
| Software and subscriptions | Business software (Xero, Microsoft 365, etc.) |
| Internet and phone | Business proportion if shared with personal use |
| Professional fees | Accountant, lawyer, consultant fees |
| Vehicle expenses | Business proportion (logbook required) |
| Business travel | Airfares, accommodation for business purposes |
| Advertising and marketing | All business promotion costs |
| Stock and raw materials | Goods for resale or used in making supplies |
| Utilities | For business premises |
What You Cannot Claim
| Non-claimable | Reason |
|---|---|
| Private/personal expenses | Must be for business use |
| Residential rent paid | Residential rental is exempt — no GST content |
| Purchases from non-GST-registered suppliers | No GST was charged |
| Expenses without a valid tax invoice (over $50) | No invoice = no claim |
| Entertainment expenses | 50% rule applies (see below) |
| Wages and salaries paid | Not a supply of goods/services |
| Life insurance premiums | Financial services are exempt |
Entertainment Expenses: The 50% Rule
Entertainment expenses are only 50% deductible for GST (and income tax):
- Business meals and drinks: 50%
- Corporate box tickets: 50%
- Holiday accommodation for clients: 50%
If you paid $230 (inc. GST of $30) for a business meal, you can claim $15 in GST (50% × $30).
Mixed-Use Expenses: Apportionment
When an expense is partly for business and partly personal, you must apportion your input tax credit claim:
Formula: Claimable GST = Total GST × (Business use % ÷ 100)
Example — vehicle:
- Vehicle is 70% business use (supported by logbook)
- Annual running costs: $3,450 (inc. $450 GST)
- Claimable GST: $450 × 70% = $315
Example — home office:
- Home internet: $120/month (inc. $15.65 GST)
- Business use: 40%
- Claimable GST: $15.65 × 40% = $6.26/month
Common mixed-use items requiring apportionment:
- Vehicles
- Home internet and phone
- Home office expenses
- Computers used for both work and personal activities
Tax Invoices: Required Documentation
For purchases over $50, you must hold a valid tax invoice to claim GST. A valid tax invoice includes:
- The words “Tax Invoice”
- Supplier’s name and GST number
- Date
- Description of supply
- GST amount (or statement that GST is included)
- Total amount
For purchases under $50, you do not need a formal tax invoice — a receipt showing the GST content is sufficient.
Practical tip: Keep digital copies of all invoices. Cloud accounting software (Xero, MYOB) lets you attach receipts to transactions and auto-calculates GST claims.
Capital Assets (Over $5,000)
When you purchase a significant business asset (over $5,000, such as a vehicle or expensive equipment), you generally claim the full GST in the period of purchase. This can result in a large GST refund in that period.
If you later sell the asset, you must account for GST on the sale (if you are still GST-registered).
GST Refunds
If your input tax credits exceed your output tax in a period, you receive a GST refund from IRD. Common situations where refunds arise:
- You purchased expensive equipment
- You are an exporter (sales are zero-rated at 0% but you claim full input tax)
- Seasonal businesses where slow periods have more purchases than sales
Refunds are generally processed within 15 working days if your account is in good standing.
Frequently Asked Questions
Can I claim GST on purchases I made before I registered?
Yes — you may be able to claim GST on assets and stock held at the date of your GST registration. This is called a “going concern” GST claim. The rules are complex; speak to an accountant if you have significant pre-registration purchases.
My supplier is not GST-registered. Can I claim GST?
No. If the supplier is not registered, they should not have charged you GST. There is no GST content to claim. If they did charge GST unlawfully, contact them for a correction.
How do I know if a supplier is GST-registered?
You can verify on the IRD website using their GST number. Their invoices should display their GST/IRD number. A business charging GST without being registered is doing so unlawfully.
I run a business and also rent out a residential property. Can I claim GST on all my expenses?
No — residential rental is an exempt supply (no GST applies). You cannot claim input tax on expenses relating to the rental. You must separate your business expenses (taxable supply) from rental expenses (exempt).