Creditable purchases are those bought for a creditable purpose, that is, for use in the business (unless it is for use in making input taxed sales). Things purchased or private use are not creditable purchases.
By completing labels G10 to G20 the amount of input tax credit that the business is entitled to can be calculated. This information is used elsewhere in the activity statement to calculate the amount owed to or owed by the ATO.
Where the purchases or importations are for use in the business (except for making input taxed sales), the business is entitled to input tax credits for the GST:
included in the price charged (for taxable sales to the business of goods, services and anything else), or
payable to the Australian Customs Service on importations or payable under the deferral scheme.
When to account for purchases
If GST is accounted for on a cash basis: If the business accounts for GST on a cash basis, it can claim credits only when it actually pays for its purchases. This means that the payments made should be included, not amounts payable, for purchases in the tax period in which the payments are made.
If GST is not accounted for on a cash basis: If the business does not account for GST on a cash basis, it can claim credits for the GST included in the amount payable for purchases in the tax period in which the business paid any of the consideration or the supplier has issued an invoice requesting payment.
Discounts, rebates and other changes to consideration: If there is a change to the consideration for any purchases included in a previous activity statement, the business may account for the change:
At Label G10 or G11, showing the increased or reduced amount of purchases, or
At Label G7 or G18, showing the change as an adjustment.
For an increase in consideration, including the amount at labels G10 or G11 instead of at G7 or G18 does not alter the obligation to hold an Adjustment Note for that increase.
Example: The business may have chosen to net discounts off its purchases or to show them in a separate account. If the business receives a volume discount in the current tax period in relation to purchases which are included at labels G10 or G11 on a previous activity statement, either of the following may be done:
- Show the reduced amount of purchases at Label G10 or G11 on the current activity statement. This option is available only if the accounts show the purchases net of discounts. If the change to the consideration related to a non-creditable purchase, also show the reduced amount at Labels G13, G14 or G15.
- Show the amount of the reduction as an adjustment on the activity statement for the tax period in which the discount was received. Adjustments are shown at Label G7 and G18.
When to account for taxable importations
Whether the business accounts for GST on a cash basis or not, include the value of taxable importations in the tax period in which:
GST is paid on the importation, or
if the business participates in the GST deferral scheme, it becomes liable to pay GST on the goods imported. The business becomes liable to pay GST under the deferral scheme when the goods are imported and the entry for home consumption is finalised.