How to use a second-hand goods credit for GST

Introduction

You may be able to claim an "input tax" credit for GST when you buy second-hand goods in a sale that’s not covered by the GST scheme.

When will I be able to claim this GST credit?

To qualify for this credit the following conditions must be met:

• You must have bought the second-hand goods for your business, rather than for personal use.
• You must have either:

• bought the goods from someone who isn’t registered for GST, or
• if the seller is GST-registered, bought goods that aren’t part of the seller’s business (that is, "exempt" goods)

• The goods must be in New Zealand.
• You must have paid for the second-hand goods in the same taxable period in which you’re claiming the credit.

If all these conditions are met, you can claim one ninth of the purchase price as a GST credit.

An example of where the second-hand goods credit is available would be where you are a car dealer and you buy a second-hand car from an unregistered person.

What are second-hand goods under the GST scheme?

Second-hand goods means goods that have been previously used and paid for by someone else.

This doesn’t include:

• new goods
• primary produce (unless it’s been previously used)
• goods supplied under a lease or rental agreement
• livestock, or
• second-hand goods consisting of any fine metal of any degree of purity

What details will I have to record about the sale?

Because there will be no tax invoice or GST charged when you buy the goods, you’ll have to record the following details in order to claim the second-hand goods credit:

• the seller’s name and address
• the date of the sale
• a description of the goods
• the quantity of the goods
• the price you paid