Motor Vehicle GST Apportionments
GST on vehicles should be claimed based on actual use. When purchasing a vehicle GST can be claimed based on percentage of intended use. This should then be reviewed on an annual basis at the first balance date post acquisition or the balance date following you have had the asset for less than 12 months and that is your preference.
Determining actual use needs to be based on a fair and reasonable method. A logbook that has been kept for 3 months in a 3 year period is a fair and reasonable method. If during the 3 year period there has been a significant change in the use of a vehicle, a new logbook should be kept.
If the change in use from period to period is less than 10% and less than $1,000 adjustment, no adjustment is required.
John is registered for GST on a two-monthly basis. He purchases a Van for $46,000 including GST on the 30th of June 2017. He estimates that business use will be 50%. GST on $46,000 is $6,000, so 50% - $3,000 can be claimed in his GST return for the period ended 31 July 2017.
Johns first balance date after this is 31 March 2018, he decides to wait until the 31 March 2019 period to look at his % claim as 31 March 2018 is less than 12 months after the date of purchase 30 June 2017.
On the 31st of March 2019, John through his logbook has determined that the actual use of his vehicle was 70%. As the change of use is more than 10% he needs to do an adjustment. To do this he needs to make a GST adjustment in the next GST return. To work this out he looks at the original full claim GST amount $6,000 and multiples this by 20% (70%-50%), a $1,200 GST claim is able to be made in box 13 of the next return.
Had Johns actual use reduced to 30%, he would have to pay GST in his next GST return of $6,000 x -20% (30%-50%), so a box 9 adjustment of $1,200 would be required.
In April 2019 John sells his vehicle for $25,000 GST inclusive. In the April/May 2019 GST return he returns the full GST on sale of $3,260.87 in his return. He will also include the final GST adjustment on disposal, actual deduction so far is $3,000+$1,200 = $4,200. The adjustment is calculated as follows 3/23 x $25,000 (1-($4,200/$6,000) = $978.26.
The first part of the formula is GST on $25,000 which is $3,260.87, the $4,200 is the GST claimed so far on the vehicle and the $6,000 is what the full value of the GST was on purchase.
If your eyes have started to glaze over while you read this, just remember that your client manager can manage these adjustments for you.