If you're GST registered and you have a mixed-use asset, you can claim 100% of the GST you pay for any expense that relates solely to the income-earning use of the asset. For example, the costs of advertising for guests for your holiday home.
If an expense relates to both income-earning use and private use, you need to apportion it between those 2 uses. Use the following calculation when you're working out an adjustment for GST input tax on your mixed-use assets.
Income-earning days / (income-earning days + private days)
x amount of input tax
Input tax is the total input tax for the mixed-use expenses. It does not include input tax on expenditure relating solely to taxable days and non-taxable days.
Income-earning days is the total number of days when rent or a fee is paid for the use of the asset, regardless of the amount paid. It includes family, non-associated persons and any income-earning use spent repairing or relocating the asset.
Private days is the total days the assets is used with no amount of rent or fee paid.
Note that the definition of 'income-earning days' is different from the days used to work out income tax expenses. For GST purposes it includes all days that rent is received, regardless of what percentage of market rate is paid.
Using alternative measures other than days
You can use other measures in the formula if they reflect the time the asset is used more accurately. For example:
- flying hours for an aircraft
- nights for a holiday home.
You calculate the adjustment for an adjustment period to get the amount of GST input tax to claim in your return.
Regan purchases a charter boat on 1 April 2018 for $450,000 which is used both to earn income and for private use. He accounts for GST input tax for the 2019 tax year as follows:
Fully deductible expenses
- annual Maritime NZ survey fees - $700
- charter advertising - $400
- food/drinks (charter guests only) - $500
Regan claims the full input tax and does not make an adjustment as the expenses relate solely to earning income.
Not deductible
$250 for family fishing licenses is a private expense, so he does not claim any GST input tax.
Apportioned (mixed-use) expenses
There are mixed-use expenses that relate to both income-earning and private use.
- mooring fees - $2,000
- fuel - $1,200
- insurance - $2,450
- general repairs - $300
Total mixed-use expenses - $5,950
When Regan bought the boat he estimated that its taxable use would be 50%. He claimed input tax on the mixed expenses of $29,735.86 (credit) as follows:
| Expense | Cost | GST value | 50% input tax claimed |
|---|---|---|---|
| purchase of boat | $450,000 | $58,695.65 | $29,347.82 |
| mooring fees | $5,950 | $776.09 | $338.04 |
| Total input tax | $29,735.86 |
During the year the boat was used:
Income earning days
- days fully chartered to the public - 102
- days chartered at 50% market rate to Regan's local fishing club - 20
Total income earning days - 122
Private days
Days the family used the charter boat without making any payment - 30
Income-earning + private days = 152
Total input tax (boat $58,695.65 + mixed-expenses $776.09) = $59,471.74
The calculation is:
(122 / 152) x $59,471.74 = $47,733.90 input tax
Regan claimed input tax of $29,735.86 during the year. He is entitled to claim a further amount $17,998.04 (credit) as an adjustment for input tax in his final GST return of the 2019 tax year.
The calculation is:
$47,733.90 minus $29,735.86 = $17,998.04
Find out more
You can find more information in our Tax Information Bulletin, Vol 25, No 9, October 2013 pages 21-22.
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