Calculate a one-off adjustment of business assets used privately
When to use a one-off adjustment
You use a one-off adjustment when:
- you acquire a business asset that will be used privately, or
- there is a change in use of an asset from business to private.
You can make a one-off adjustment in the period in which you acquired the asset or in which the change in use occurred. This means that you do not have to make a period-by-period or annual adjustment.
The one-off adjustment can be made regardless of whether you hold the asset for one year or ten years.
How to calculate it
The following formula is used to calculate the one-off adjustment to include in Box 9 on your GST return.
Purchase price multiplied by estimated private use as a percentage multiplied by 3 then divided by 23 = one-off adjustment
What to be aware of
- If the asset is acquired to replace another asset with an existing use, and you choose to make a one-off adjustment, the pattern of use that has been established for the original asset may be applied to the replacement asset to reflect the private use.
- If a pattern of use does not exist, you must estimate the amount of private use that will apply to the asset and revise the provisional use after twelve months.
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You must make an additional one-off adjustment if there is a:
- total change in use, or
- change of 20% or more (either an increase or decrease).
Examples
Example 1: Adjustment for private use of a business computer
Paul bought a computer system for $4,600 (including GST). He proves he is going to use it 90% for business and 10% for private purposes.
Paul includes $4,600 in Box 11 of his GST return and gets a $600 GST credit ($4,600 x 3 divided by 23).
The one-off adjustment is based on the private use:
$4,600 x 10% (x 3 divided by 23) = $60.
Paul includes $60 on his GST adjustments calculation sheet (IR372) under "Business assets used privately (a one-off adjustment)". He then transfers the total amounts to Box 9 on his GST return.
Example 2: Accounting for a subsequent change in use
In a future taxable period, Paul's computer system is used 70% for business and 30% for private purposes. The private use of his computer system has changed from 10% to 30%. This means there has been a change in use of 20% so a further adjustment is required.
Paul originally made a one-off adjustment of $60 based on 10% private use. He now has to make an additional one-off adjustment based on the increased private use of 20%:
$4,600 x 20% (x 3 divided by 23) = $120
Paul includes $120 on his GST adjustments calculation sheet (IR372) under "Business assets used privately (a one-off adjustment)". He then transfers the total amounts to Box 9 on his GST return.
Calculating one-off adjustment when GST rate changes
On 1 October 2010 the GST rate changed from 12.5% to 15%. If the asset was applied to private user prior to 1 October 2010 then the one-off adjustment can be calculated at the rate of 12.5%, even if accounted for in a later return period.
To calculate the one-off adjustment at 12.5% the purchase price is multiplied by estimated private use as a percentage and is then divided by 9 = one-off adjustment.
A GST-registered person can also choose to make the adjustment at the new GST rate of 15% even if the change of use occurred prior to 1 October 2010.
Next steps
- Calculate a period-by-period adjustment for business assets used privately
- Calculate an annual adjustment for business assets used privately
- Calculate the private use of a business motor vehicle
Date published: 29 Sep 2010
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