You need to adjust the GST claimed if the amount of taxable use of a good or service changes by more than 10%, or if the amount of the adjustment required is more than $1,000.
You need to review the taxable use over an adjustment period. The number of adjustment periods you need to make adjustments for depend on the GST-exclusive cost.
|GST-exclusive cost||Adjustment periods|
|Up to $5,000||0|
|$5,001 to $10,000||2|
|$10,001 to $500,000||5|
For land, you must work out the business and private use every year.
You can also choose to use the estimated useful life of an asset for the maximum number of adjustment periods. You can find this information in our depreciation rates.
You can choose your first adjustment period. The choice is from the date of acquisition, until the end of either:
- your current tax year
- the tax year at least 12 months after the date of acquisition.
Each adjustment period after this is the same as your tax year.
Exemption when you make taxable and exempt supplies
If you make taxable and exempt supplies, you do not need to make an adjustment for goods and services you acquire and use when the total value of the exempt supplies in an adjustment period are no more than the lesser of either:
- 5% of the total consideration for all taxable and exempt supplies in the adjustment period.
Adjustment when supply becomes 100% business or private use
When an apportioned good or service becomes 100% business or private use, you need to make a wash-up adjustment.
This adjustment needs to be made when the use changes and remains unchanged for a full adjustment period even if the change is within the 10% or $1,000 threshold.
Work out the wash-up adjustment using the calculation:
Full input tax deduction (including any nominal GST component charged on a zero-rated land transaction) - actual deduction (including adjustments made already) = wash-up adjustment
If you make a wash-up adjustment and the change to 100% business or private use carries on for more than 2 years, you'll no longer have to make annual adjustments.
But you'll need to start making annual adjustments again if your good or service has a further change in use later on.
Final adjustment on disposal of an asset used in a taxable activity
You need to make a final adjustment when you dispose of the asset to allow for any GST not claimed.
Use the following calculation to work out the final adjustment.
Tax fraction x Consideration x (1 - Actual deduction / Full GST charged)
Tax fraction is 15% GST or 3/23
Consideration is the amount received, or treated as received, for the supply.
Actual deduction is the GST claimed, including adjustments made, up to the date of disposal.
Maximum adjustment for property developers
If you're a property developer, your final adjustment cannot exceed the amount of the GST you claimed when you first acquired the asset.
Melissa buys a car for $46,000 (inclusive of $6,000 GST). She claims 70% input tax of $4,200. The car is sold for $30,000 (GST inclusive). Full input tax has not been claimed for the car, so a final adjustment for input tax must be calculated.
3/23 x $30,000 x (1 minus $4200/$6,000) = $1,174