How to Claim GST Credits Correctly on Your BAS (And Avoid Common Mistakes)

Getting Your BAS Right Matters More Than You Think

For many small business owners, lodging a Business Activity Statement (BAS) is a routine task that happens monthly or quarterly. But routine does not mean simple. GST credit claims are one of the most common areas where businesses make mistakes, and those mistakes can cut both ways: you may be over-claiming credits you are not entitled to, which can trigger ATO scrutiny, or you may be under-claiming, which means you are leaving money on the table.

The ATO has been actively reminding businesses to review their GST credit claims carefully before lodging each BAS. With data matching becoming more sophisticated and audits on the rise, getting your GST claims right the first time is worth the effort.

This blog walks you through the essentials of claiming GST credits correctly, what you cannot claim, how to handle mixed business and private use, and what to do if you have made mistakes in the past.

What Is a GST Credit?

A GST credit (also called an input tax credit) is the GST component you can claim back on things you buy for your business. When you are registered for GST, you charge GST on your sales and pay it to the ATO through your BAS. To avoid double taxation, you can offset the GST you have already paid on your business purchases against the GST you owe on your sales.

According to the ATO’s claiming GST credits page, you can claim a GST credit for any goods and services you buy for your business, provided the purchase meets the eligibility requirements. GST credits are claimed by reporting them on your BAS for the relevant tax period.

The Basic Rule: You Must Be Registered for GST

Before you can claim any GST credits, you must be registered for GST. If your annual business turnover is $75,000 or more (or $150,000 or more for not-for-profits), you are required to register. If you are below those thresholds, registration is optional, but you cannot claim GST credits unless you are registered.

If you are not registered for GST, you cannot include GST in your prices and cannot claim GST credits on your purchases, even if the supplier charged you GST. If your turnover is approaching the $75,000 threshold, it is worth planning your registration timing with your tax adviser.

The Four Core Requirements for Claiming a GST Credit

To claim a GST credit for a purchase, all four of the following conditions must be met:

1. You are registered for GST.
2. You intend to use the purchase for your business (not purely for private or domestic purposes).
3. The purchase does not relate to making input-taxed supplies (such as providing residential rental accommodation, which is GST-free and therefore does not entitle you to GST credits on related purchases).
4. You hold a valid tax invoice for purchases that cost more than $82.50 (including GST) at the time you lodge your BAS.

As the ATO’s page on when you can claim a GST credit explains, you should also check that your supplier is registered for GST before claiming credits. You can verify this using the ABN Lookup tool on the Australian Business Register.

What You Cannot Claim: The Rules Are Clear

The ATO is very specific about what cannot be claimed as a GST credit. According to the ATO’s when you cannot claim a GST credit page, you cannot claim a GST credit in the following circumstances:

No Tax Invoice

For any purchase over $82.50 (including GST), you must hold a valid tax invoice when you lodge your BAS. If you do not have one, you cannot claim the credit until you obtain it. Requests for tax invoices from suppliers should be made before or at the time of purchase, not chased up later when you realise you need them for your BAS.

Cancelled or Reversed Transactions

If a purchase was subsequently cancelled or reversed, you cannot claim a GST credit for it. If you have already claimed the credit in a previous BAS, you need to reverse the claim in your next BAS to avoid overclaiming.

Purchases Without GST in the Price

Not all business purchases include GST. Common examples of GST-free or input-taxed purchases where no GST credit can be claimed include:

• Bank fees and financial services (these are input-taxed and do not include GST)
• Residential rent paid by your business
• Basic food items (which are GST-free)
• Wages and salaries paid to employees
• Government charges such as council rates and stamp duty (in most cases)

Attempting to claim GST credits on these types of expenses is a common error that the ATO identifies through BAS data analysis.

Private or Domestic Purchases

Purchases made entirely for personal use have no business purpose and therefore attract no GST credit entitlement. This sounds straightforward, but the line between personal and business use is often blurred for sole traders and small business owners who use the same assets for both purposes.

Entertainment Expenses

Entertainment expenses (such as meals and drinks for clients or staff) generally cannot be claimed as an income tax deduction, and for the same reason, you usually cannot claim a GST credit for them either. There are narrow exceptions, so if entertainment is a significant part of your business expenses, this is worth discussing with your adviser.

The Car Cost Limit

If you purchase a car for your business, the GST credit you can claim is capped. Specifically, the credit is limited to one-eleventh of the car depreciation limit for the relevant financial year, regardless of what you actually paid. For the 2025-26 income year, the car limit for depreciation is $69,674, which means the maximum GST credit claimable on a car purchase is $6,334 (one-eleventh of $69,674), even if the actual GST paid was higher.

Mixed Use Purchases: The Apportionment Requirement

This is where many business owners get into trouble. If you buy something for both business and private use, you can only claim the GST credit on the business-use portion of the cost.

The ATO’s GST credits page for ride-sourcing provides a clear practical example: if a driver uses their car 10% of the time for ride-sourcing and 90% for personal travel, they can only claim a GST credit equal to 10% of the total GST paid on car-related expenses.

The same principle applies to any mixed-use asset or expense, including:

• A mobile phone used for both work calls and personal use
• A home internet connection is used partly for working from home
• A vehicle used for both business trips and personal errands
• A laptop or tablet used for both business and personal purposes

You must be able to support your apportionment percentage with records. If you claim 80% business use on a phone but cannot show records that support it, you are exposed to a disallowance of some or all of the claim.

Annual Private Apportionment: A Simpler Option

For businesses that find it burdensome to apportion GST credits on every BAS, the ATO offers an option called annual private apportionment. Under this approach, you claim the full GST credit upfront on each BAS throughout the year, and then make a single adjustment for the private-use portion at the end of the financial year.

As the ATO’s calculate your GST credits page explains, annual private apportionment reduces the administrative burden of calculating the business-use percentage on every single BAS. However, it is important to understand that it is not a way of avoiding the apportionment requirement altogether. The adjustment must still be made annually. Please contact our office if you would like help using the annual private apportionment correctly.

The Four-Year Time Limit on GST Credits

Many business owners are unaware that there is a hard deadline for claiming GST credits. According to the ATO’s time limit on GST credits page, you must claim a GST credit within four years of the due date of the BAS in which you could have first claimed it. Once this four-year window closes, the credit expires permanently, and the ATO has no discretion to reinstate it, even if an amendment is still technically open for other purposes.

This means that if you have old, unclaimed GST credits from purchases made in prior years, you need to act within the four-year window, or those credits are gone forever. Do not assume that because you can still amend a BAS, you can still claim the credits.

Nil BAS: You Must Still Lodge

If you have nothing to report for a BAS period (for example, your business had no sales and made no purchases), you are still required to lodge a nil BAS by the due date. Failing to lodge, even when there is nothing to report, can result in the ATO issuing a Failure to Lodge (FTL) penalty.

This catches many newer business owners off guard. Once you are registered for GST and assigned a BAS lodgment cycle, you must lodge every BAS on time, regardless of activity.

Common GST Credit Mistakes to Avoid

Based on ATO guidance and common compliance issues, these are the GST credit mistakes that appear most frequently on BAS lodgments:

Claiming GST on bank fees. Bank fees do not include GST. This is one of the most common errors seen in small business BAS lodgments, and it is easy to make if you are using accounting software that has not been set up correctly to exclude financial supplies from GST credit claims.

Claiming the full credit on a mixed-use purchase without apportioning. Claiming 100% of the GST credit on a phone, vehicle, or computer that has any private use component is an overclaim, and one that the ATO specifically flags.

Claiming credits without a tax invoice. Without a valid tax invoice for purchases over $82.50, you do not have a legal entitlement to the GST credit. Ensure you request and file tax invoices for every purchase above this threshold.

Claiming GST on wages. Employee wages are not subject to GST and cannot attract a GST credit claim. If your payroll is processed through accounting software, double-check that wages are mapped to a non-GST account.

Claiming credits for cancelled purchases. If a purchase was reversed or refunded, any associated GST credit previously claimed must be adjusted in the next BAS.

What to Do If You Have Made Errors on a Past BAS

If you have identified an error on a previously lodged BAS, whether you have overclaimed or underclaimed GST credits, you have several options:

• For small errors (generally under $10,000), you can include an adjustment in your next BAS rather than lodging an amendment.
• For larger errors or errors that span multiple periods, you should lodge a revised BAS through the ATO’s Online Services for Business.
• For unclaimed GST credits from prior years, you must act before the four-year time limit expires on those credits.

The ATO’s online services for business portal allow you to view and revise your BAS lodgments directly.

A Quick BAS Checklist Before You Lodge

Use this checklist before submitting each BAS:

• Do you hold a valid tax invoice for every purchase over $82.50?
• Have you removed any bank fees or financial charges from your GST credit claims?
• Have you apportioned any mixed business and private use purchases correctly?
• Have you excluded any wages, salaries, or superannuation from your GST credit calculations?
• Have you reversed any credits for purchases that were cancelled or returned?
• If you have no activity for the period, have you still lodged a nil BAS?

How JMB Consultants Can Help

GST credit claims are deceptively simple in concept but surprisingly easy to get wrong in practice, particularly when mixed-use assets, input-taxed supplies, or high volumes of transactions are involved. At JMB Consultants, we can:

• Review your BAS lodgments to identify overclaimed or underclaimed credits
• Set up your accounting software correctly to avoid recurring GST errors
• Assist with amending prior BAS lodgments within the four-year time limit
• Advice on annual private apportionment for mixed-use expenses

Contact us before your next BAS is due to make sure your GST claims are accurate, compliant, and fully optimised.

The information in this blog is general in nature and does not constitute personal tax advice. Please seek professional advice to confirm how these rules apply to your specific circumstances.