Yes, small businesses can claim back GST in Australia. If your business is registered for GST, the Australian Taxation Office lets you recover the GST component of eligible business purchases through what it calls input tax credits. You offset those credits against the GST you've collected from customers, and the difference is either what you pay or what you get refunded. It's one of the more straightforward parts of the GST system, but a few key rules trip up small business owners every year.
What are input tax credits?
An input tax credit (ITC) is the mechanism through which you claim back GST you've paid on a business purchase. When a supplier charges you GST, you've effectively prepaid a tax that belongs to the government, not the supplier. The ITC system lets you recover that amount, so GST ultimately falls on the end consumer rather than on your business.
Say you buy $1,100 worth of materials. The supplier's invoice shows $100 GST. You claim that $100 as an ITC on your Business Activity Statement (BAS). If you collected $500 GST from your own customers that quarter, your net GST liability is $400, not $500.
The ATO processes BAS returns monthly, quarterly, or annually depending on your reporting cycle. Most small businesses report quarterly.
When can your business claim GST back?
Three conditions must all be met before you can claim an ITC on a purchase:
- Your business is registered for GST.
- You purchased the goods or services for use in carrying on your business (not for private or domestic use).
- The supplier's invoice includes GST (i.e., the supply is taxable, not GST-free or input-taxed).
The purchase also needs to be backed by a valid tax invoice from the supplier for any amount over $82.50 (including GST). Below that threshold, a simple receipt may suffice, but good recordkeeping habits mean you should store everything regardless.
Do you need to be registered for GST?
GST registration is the hard prerequisite. Businesses with a GST turnover of $75,000 or more per year must register. Businesses below that threshold can register voluntarily, and many do, specifically to access ITCs on significant purchases like vehicles, equipment, or fit-outs.
If your business earns under $75,000 and you haven't registered, you can't charge GST to customers and you can't claim GST back on your costs. The two are inseparable. This is worth revisiting if your purchases regularly include large GST amounts, because the voluntary registration option effectively gives you a 10% saving on business inputs. For more on structuring your obligations correctly, the guide to small business accounting tips for Australian business owners covers the fundamentals of keeping your financial records in order.
What purchases qualify for a GST claim?
The purchase must relate to running your business. Common qualifying categories include tools and equipment, office supplies, software subscriptions, business insurance premiums, professional services fees (legal, accounting, consulting), vehicle running costs (where the vehicle is used for business), rent on a commercial premises, and advertising costs.
Purchases for private use don't qualify. If you buy a laptop and use it 60% for business and 40% for personal tasks, you can only claim 60% of the GST as an ITC. Mixed-use assets require you to apportion the claim honestly, and the ATO does scrutinise this category during audits.
Some categories are always excluded. Wages and salaries carry no GST. Purchases from suppliers who aren't registered for GST carry no GST to claim. Financial supplies (like bank fees on certain loan products) are input-taxed, which means they carry no GST credit entitlement. And GST-free supplies, like most basic food and exported goods, carry no GST either.
How to actually lodge your GST claim
You claim ITCs through your BAS, lodged via the ATO's online services. The process runs like this:
- Record the GST on each purchase in your accounting software or ledger as you go. Don't leave it to the last week before your BAS is due.
- Reconcile your tax invoices against your bank statements at the end of each reporting period.
- Enter total GST collected from customers at label 1A on the BAS.
- Enter total GST credits on purchases at label 1B.
- The form calculates whether you owe the ATO or are owed a refund.
If your ITCs exceed the GST you collected, the ATO refunds the difference to your nominated bank account, usually within 14 business days for electronically lodged BAS returns. Cash flow timing matters here, so quarterly reporters need to plan around BAS due dates rather than waiting until the end of the financial year.
Common mistakes small businesses make
Claiming GST on non-tax invoices is the most frequent error. Without a valid tax invoice, you have no documentary basis for the credit, and the ATO will disallow it. A tax invoice must show the supplier's ABN, confirm the supply is subject to GST, and state either the GST amount or a statement that the total includes GST.
Over-claiming on mixed-use assets is the second most common issue. Claiming 100% of the GST on a car used partly for personal errands isn't a grey area; it's incorrect and reversible on audit.
A third pitfall: claiming GST on purchases made before you registered for GST. You can only claim ITCs from your GST registration date forward, with one exception. If you registered before your first BAS period and made purchases in reasonable anticipation of carrying on a business, you may be able to claim credits on pre-registration purchases. The ATO's rules on this are narrow, so check with your accountant before claiming.
If you're also working out your broader business structure, the article on starting a small business while working full time covers how obligations like GST fit alongside employment income.
Keeping records the ATO will accept
The ATO requires you to keep records that support your GST claims for 5 years. That means storing tax invoices (digital copies count), BAS copies, and any workpapers showing how you calculated apportioned claims. Cloud accounting tools like Xero and MYOB make this straightforward, and they generate BAS-ready reports directly from your transaction history.
Paper receipts fade. Photograph them or scan them on the day you receive them. Losing the documentary trail is how an otherwise-legitimate ITC claim becomes unclaimable when you're reviewed.
When to talk to an accountant
Most quarterly BAS lodgements are straightforward once you've done them a few times. But certain situations warrant professional advice: a first-time registration, a business with significant capital purchases (like a work vehicle or machinery), a mixed-use property, or a business that exports goods. In these cases the GST rules interact with depreciation, fringe benefits, and customs duty in ways that can either cost you money or trigger a compliance risk if handled without specialist input.
GST registration is ultimately a straightforward obligation for businesses above the $75,000 threshold. But it's also a genuine financial benefit. Claiming back GST on your business costs puts real money back into your cash flow every quarter.