You may need to adjust the GST claimed if the business, exempt or private use of a good or service changes.
You may need to make a change in use adjustment when the actual taxable use varies from the intended taxable use.
See Ben's example below.
When adjustments are not required
You will not need to make an adjustment if:
- the GST exclusive cost of the good or service is $10,000 or less.
- the value of the adjustment is less than $1,000 and the change in taxable use is less than 10%
- you make taxable and exempt supplies, when the total value of the exempt supplies in an adjustment period is less than $90,000 and 5% of the total consideration for all taxable and exempt supplies in the adjustment period.
GST adjustments for business, private and exempt use
Number of GST adjustment periods
From 1 April 2023, the number and the value of the adjustment periods have changed. Fewer adjustments are required for land, as well as goods and services less than $20,000.
The number of times you need to review the taxable use (referred to as the number of adjustment periods) will depend on the GST exclusive cost of the good or service.
| GST-exclusive cost | Adjustment periods |
|---|---|
| Up to $10,000 | 0 |
| $10,001 - $20,000 | 2 |
| $20,001 - $500,000 | 5 |
| Over $500,000 or land (of any value) | 10 |
You can choose your first adjustment period. It will be from the date of acquisition of the good or service, until the end of one of the following:
- your current income year
- the income year at least 12 months after the date of acquisition.
Each adjustment period after this is the same as your tax year.
Other methods
You can also choose to use the estimated useful life of an asset for the maximum number of adjustment periods.
Wash-up adjustment when the percentage use of goods or services permanently changes
A wash-up adjustment is used when the business, exempt or private use of a good or service changes and you do not expect it to change again. Work out the adjustment using this calculation:
(Full GST amount x new percentage) – actual deduction = wash-up adjustment
- The full GST amount of the good or service. For a zero-rated land transaction, this would be 15% of the purchase price.
- New percentage is the percentage of intended use.
- Actual deduction is the GST previously claimed, including adjustments.
If you make a wash-up adjustment, you'll no longer have to make annual adjustments.
If your good or service changes in use later, you’ll need to make another 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.
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 which has not been claimed.
Use the following calculation to work out the final adjustment:
Tax fraction x Consideration x (1 – Previous use)
- Tax fraction is 15% of the GST exclusive amount or 3/23rds of the GST inclusive amount
- Consideration is the amount received, or treated as received, for the supply.
- Previous use is the percentage intended use (if owned less than an adjustment period) or the previous actual use in the last adjustment period before disposal.
Maximum adjustment for property developers
If you're a property developer, your final adjustment cannot exceed the tax fraction of the purchase price when you first acquired the asset.
Ben operates a GST registered business. He bought a car to use in his business. Ben claimed the vehicle purchase based on an estimated business use of 80%. Ben ends up using the vehicle 100% for his business. Ben can claim the remaining 20% of the vehicle cost in the first GST return after his balance date.
Ben needs to monitor his business use. If his business use changes, he may need to make another change in use adjustment, after his next balance date.
To determine whether a change in use adjustment is required, you need to review the taxable use of goods or services.
Sally bought a vehicle for her GST registered business on 1 June 2020 for $15,000 (GST exclusive). As the vehicle was used 100% for her business, Sally claimed the full amount of GST.
Before 1 April 2023, Sally had to monitor her business use over 5 adjustment periods.
After 1 April 2023, Sally can stop monitoring her vehicle use (for GST purposes), as the required number of adjustment periods has been reduced.
Melissa buys a car for $46,000 (inclusive of $6,000 GST). She claims 70% input tax of $4,200. The car is later sold for $30,000 (GST inclusive). As Melissa did not claim the full GST on the car, she needs to make a final adjustment, calculated as follows:
3/23 x $30,000 x (1 - 0.7) = $1,174
Emily, a property developer bought an apartment to renovate and rent. The input tax on the cost of the property, plus renovations was $60,000. Emily claimed 64.8% of the input tax - $38,880, because the property had a mix of taxable and exempt use.
Emily sold the apartment for $640,000.
As Emily has not claimed the full input for the purchase and renovation cost she makes a final adjustment of the input tax:
3/23 x $640,000 x (1- 0.648) = $29,384
When Emily adds $29,384 to the deduction already claimed ($38,880), this is more than the total amount of the input on the supply ($60,000). As Emily is a property developer selling land, her adjustment is limited to $21,120.
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