Tax tip: Buying a second hand asset | Beany

Tax tip: Buying a second hand asset

Topical Tax Issues

We quite often get asked if you can claim back the GST when buying a second hand asset for your business from someone that isn’t GST registered.  For example, you might buy a piece of business equipment on TradeMe and the seller isn’t going to provide a nice GST invoice for your records.

Well, the good news is you can claim back the GST on your purchase.  You take the total price paid (and note here, you have to have actually paid for it before you claim) and divide by 23 and multiple by 3 to get the GST portion.  Alternatively just pay through your business bank account and treat as a business purchase as a GST purchase in your software and that should do the trick.

Records

Only thing to note is that even if you don’t have a GST invoice, you still need to record the following:

  • name and address of the supplier
  • date of the purchase
  • description of the goods
  • quantity of goods
  • price paid.

Exception

The only exception to this general rule is if you’re buying off someone associated to you, so if you buy a car from your brother and he’s not GST registered then you can only claim the lowest of:

  • purchase price
  • current market value, or
  • GST component (if any) of the original cost of the goods to the supplier.

This is to prevent any tax shenanigans between mates or family!

So make sure you don’t forget to claim everything you’re entitled to.  If you have a particular question or comment on this information, give us a buzz on 0800-755333 or email us at support@beany.com

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