GST and Car Expenses

If registered for GST, or required or entitled to be, a GST credit can be claimed for a car expense incurred for a creditable purpose.

For businesses carrying on an enterprise, the creditable purpose can include the vehicle’s private use by an employee, although the FBT consequences of that kind of arrangement would need to be considered. (GSTR 2001/3)

For the self-employed sole trader or carrying on business in partnership the GST credit is claimable to the extent of creditable purpose, which requires that the personal and non-creditable use percentages must be identified and excluded.

The basis of creditable purpose estimates

The GST law does not provide rules for calculating the extent of creditable purpose, so an acceptable calculation method is required.

Information about determining the extent of creditable purpose, including for car expenses, is available in Goods and Services Tax Ruling GSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose.

Broadly, the income tax substantiation method in use may also be used as the basis of calculating creditable purpose, modified if necessary by non-creditable (e.g. input-taxed) purposes.

A different method can be used from the one used for income tax, provided the requirements of the chosen method are met.

Further information

• GSTR 2006/4 Goods and services tax: determining the extent of creditable purpose for claiming input tax credits and for making adjustments for changes in extent of creditable purpose
• GSTR 2001/3 – Goods and Services Tax: GST and how it applies to supplies of fringe benefits
• Small business GST concessions
• Car expense substantiation methods

This page was last modified 2021-06-09