Claiming GST on Capital Purchases: A Practical Guide

Updated for the 2026–27 financial year

If your business is registered for GST, you can claim a GST credit, also known as an input tax credit, of one-eleventh of the GST-inclusive price on capital purchases you use in your business. This applies to machinery, equipment, office furniture, computers and other big-ticket assets, provided you hold a valid tax invoice and meet the usual conditions. This guide explains what counts as a capital purchase, when you can claim, how to handle cars and mixed-use assets, how to report it all on your Business Activity Statement (BAS), and the time limits you need to know.

Can You Claim GST on Capital Purchases?

Yes. If you are registered for GST, you can generally claim a GST credit on capital purchases that you use in your business. The credit is one-eleventh of the GST-inclusive price you paid, which simply reflects the GST component built into the price.

The same core rules that apply to everyday business expenses also apply to your big-ticket assets. You need to be registered for GST, the purchase needs to be for your business, the price needs to include GST, and you generally need a valid tax invoice. There are a few extra points to watch with capital items, such as the cap on cars and the way these purchases are reported on your BAS, and we cover each of those below.

What Is a Capital Purchase?

A capital purchase is a significant investment in an asset that provides long-term benefit and is used in your business for more than one accounting period. Unlike day-to-day expenses that are consumed quickly, capital assets stick around and are typically depreciated over their useful life rather than fully deducted in the same financial year.

Capital purchases can be new or used, as long as they are intended for long-term use in the business. The age of the item is not what matters; the intended long-term use is.

Examples of Capital Purchases

Common examples of capital purchases include:

• Machinery and equipment
• Office furniture
• Computers and electronic devices
• Vehicles
• Land and buildings

Even a relatively small item, such as an office chair, can qualify as a capital purchase if it is intended for long-term use in the business. The cost alone does not decide the question; the long-term nature of the use does.

Capital Versus Non-Capital Purchases

Non-capital purchases, also known as operating or revenue expenses, are your day-to-day costs and items for immediate use or resale. These are not intended for long-term use in the business. Examples include:

• Trading stock (goods you buy to resell)
• Office supplies and stationery
• Rent and utilities
• Marketing
• Repairs to non-capital items
• Salaries
• Insurance
• Raw materials used in manufacturing

Equipment that you rent or lease is also treated as an operating expense, not a capital purchase, because you are paying for the use of the asset rather than owning it. Trading stock is never a capital purchase, even though it can be a significant cost.

The $1,000 Threshold for Small Businesses

On the BAS, capital purchases are reported at label G10 and non-capital purchases at label G11. For smaller businesses, this distinction is made easier by a practical threshold. A purchase of $1,000 or less can generally be treated as a non-capital purchase regardless of its nature, while purchases above $1,000 that meet the description of a capital asset are reported at G10. This keeps the reporting simpler for low-value items.

Can You Claim GST on Machinery, Fixed Assets and Equipment?

Yes. You can claim GST credits on machinery, fixed assets and equipment used for your business, subject to the usual conditions. These are exactly the kinds of long-term assets the capital purchase rules are designed for. The GST credit is one-eleventh of the GST-inclusive price, and if you use the asset partly for private purposes you claim only the business-use portion.

When Can You Claim a GST Credit?

According to the ATO, you can claim a GST credit when all of the following apply:

• You are registered for GST
• You intend to use the purchase solely or partly for your business, and the purchase does not relate to making input-taxed supplies
• The purchase price included GST
• You provide, or are liable to provide, payment for the item
• You have a tax invoice for purchases that cost more than $82.50 (including GST)

It is also worth checking that your suppliers are registered for GST, because GST credits are only available where GST was actually charged. You can confirm a supplier’s registration status using ABN Lookup on the Australian Business Register website. You can read more about the conditions on the ATO page covering when you can claim a GST credit.

GST on Mixed-Use Assets

If you buy an asset that is used both for business and private purposes, such as a car or a computer, you cannot claim the full GST amount. You can only claim a GST credit for the part of the purchase that relates to your business use. You must keep records that support the business-use percentage you claim.

If your tax invoice only states that the price includes GST, you can work out the GST amount by dividing the price by 11. You then apply your business-use percentage to that figure.

Worked Example of Apportionment

Claiming GST on a Car

Cars have a special rule that caps the GST credit you can claim. If you buy a passenger car and the price is more than the car limit, the most GST credit you can claim (except in certain circumstances) is one-eleventh of the car limit. For the 2025–26 income year, the car limit is $69,674, which means the most GST credit you can claim on a car is $6,334 (that is, one-eleventh of $69,674). For 2026–27 the car limit is $69,883 and the maximum GST credit is $6,353.

The limit that applies is the one for the income year in which you first use or lease the car, so the 2025–26 limit applies to a car first used in 2025–26 and the 2026–27 limit to a car first used from 1 July 2026. Business-use apportionment still applies on top of the cap, so if you use the car partly for private purposes you claim only the business-use portion.

Luxury Car Tax and the GST Credit Cap

You cannot claim a GST credit for luxury car tax (LCT) when you buy a luxury car, even if you use it for business purposes. For the 2025–26 financial year, the LCT threshold is $91,387 for fuel-efficient vehicles and $80,567 for all other luxury vehicles; for 2026–27 it is $91,661 and $80,809. From 1 July 2025, the definition of a fuel-efficient vehicle changed, affecting vehicles with a fuel consumption rate between 3.5 and 7 litres per 100km.

Buying a Car Partly for Personal Use

If you buy a car that you use for both business and private purposes, you can only claim a GST credit for the business part. That claim is also capped at the car limit, and you must have records showing the business-use percentage. So two limits can apply at once: the car limit caps the maximum credit, and your business-use percentage reduces it further to reflect private use.

How to Report Capital Purchases on Your BAS

Capital purchases are reported at label G10 on your BAS, which captures the total GST-inclusive amount of capital assets you acquired during the reporting period. Non-capital purchases are reported at label G11. Reporting your capital purchases at G10 is what enables you to claim those GST amounts back as GST credits.

When completing the activity statement, round down to whole dollars and do not show cents. Leave a box blank if it does not apply to you, rather than writing N/A or NIL, and do not report negative figures or use symbols. You can find detailed guidance on capital purchases and BAS reporting if you want a deeper walkthrough.

What Not to Report at G10

The following should not be included at G10:

• Trading stock (goods purchased for resale)
• Day-to-day running expenses such as stationery, repairs and maintenance
• Equipment rentals or leases, which are operating expenses
• Stamp duty paid on the purchase of assets

For cars, remember the cap. You can only claim GST on the car’s price up to the car limit for that financial year, so any amount above the car limit does not generate an extra GST credit. Misclassifying purchases can lead to incorrect GST claims and potential ATO penalties, so it pays to get the labels right.

Can You Get a GST Refund on Capital Goods?

Yes, this can happen. When you have worked out your total GST credits, you offset them against the GST you are liable to pay. If your GST credits are greater than the amount you are liable to pay, you are entitled to a refund.

This is common when a business makes a large capital purchase in a quarter. A single big-ticket asset can generate a GST credit large enough to outweigh the GST you collected on sales for the period, which produces a net refund rather than a payment.

Can You Claim GST After the Purchase Has Been Made?

Yes. If you did not claim a GST credit when you should have, you can still claim it later. Unclaimed GST credits can be claimed by including them in a later BAS, for example your next BAS, or by requesting an amendment to the earlier tax period. This is subject to the time limit explained below.

The 4-Year Time Limit on GST Credits

Your entitlement to a GST credit ceases unless it is included in an assessment before the end of the four-year credit time limit. That limit ends four years after the lodgment due date of the BAS for the tax period in which you could have first claimed the GST credit. Importantly, the ATO has no discretion to extend this limit, and actions taken after it ends cannot revive your entitlement.

The starting point depends on your accounting method. If you account for GST on a cash basis, the earliest tax period in which you could claim is the period in which you make the payment. If you account on a non-cash (accruals) basis, it is the first period in which either an invoice is issued or you provide part or all of the payment. The ATO explains the detail and provides worked examples on its page about time limits on GST credits and refunds.

Records and Tax Invoices You Need

For purchases that cost more than $82.50 (including GST), you need a tax invoice to claim the GST credit. If you request a tax invoice from a supplier, they have 28 days to provide it, and you should wait until you receive it before you claim the credit.

For purchases that cost $82.50 or less (including GST), you should still keep a record such as a tax invoice, cash register docket, receipt or invoice. For purchases under $1,000, other records like receipts, EFTPOS slips or credit card statements can be used. Capital asset claims tend to be higher in value, so keeping clear records, including evidence of business use where an asset is used partly for private purposes, is especially important.

GST When You Later Sell a Capital Asset

When you sell a capital asset that you used in your GST-registered business, the sale is generally a taxable sale, which means GST is usually payable on the sale price. This is the flip side of claiming the credit on the way in.

There is also a separate rule to be aware of. If the way you use an asset changes after you buy it, a change of use adjustment may be required to make sure the correct amount of GST credit has been claimed. For example, an asset bought to make taxable sales but later used to make input-taxed supplies can trigger an adjustment. These adjustments are reported on your BAS, and you can read more about the deadline for adjusting your GST if this situation applies to you.

What You Cannot Claim

Not every purchase carries GST to claim. Some purchases are GST-free or input-taxed and have no GST component, so there is nothing to claim back. You also cannot claim a GST credit on purchases that relate to making input-taxed supplies. And as noted above, you cannot claim a GST credit for the luxury car tax included in the price of a luxury car. If in doubt, check whether GST was actually charged before assuming a credit is available.

Get Help With GST on Capital Purchases

Claiming GST on capital purchases is straightforward once you know the rules: register for GST, hold a valid tax invoice, claim one-eleventh of the GST-inclusive price for business use, watch the car limit, and report at label G10 on your BAS. Where assets are used partly for private purposes, apportion the claim and keep records to back it up. And remember the four-year time limit if you find a credit you missed.

If you are dealing with a high-value asset, a car, a mixed-use purchase, or you simply want to be sure your BAS labels are right, a quick conversation can save you from errors and missed credits. Book a meeting with the team at Tax Window and we will help you get your capital purchases and BAS reporting right.

About The Author: Artur Osadchiy

Artur is a Certified Practising Accountant with over 30 years’ experience working as a trusted advisor to 600+ clients across Australia. Based in Melbourne, he started Tax Window with his wife Marina in 2009 and leads the firm’s tax and accounting team. In his free time, Artur enjoys watching the AFL (go Kangas!) and spending time with family.

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