Have you purchased secondhand goods for your business but not paid GST on the purchase because the seller wasn’t GST registered? The good news is you can still claim a GST credit as long as the goods were located in New Zealand at the time of the purchase and you have a record of the purchase.
However regardless of which accounting basis you use, you must have made the payment for the goods before you can claim a GST credit for the purchase.
Secondhand good are defined as goods previously used and paid for by someone else. However in the context of GST claims related to this topic they do not include:-
- Primary produce unless previously used
- Goods supplied under a lease or rental agreement
- Livestook
- Fine metal or goods manufactured from fine metal of any degree of purity
If you purchase secondhand goods from an associated person who is not GST registered, the GST credit you can claim is treated differently.
It is based on the lowest of:-
- Purchase price
- Current market value, or
- GST component (if any) of the original cost of the goods to the supplier.
Examples of associated people are:-
- Companies or partnerships controlled by the same persons
- Companies and persons with a 25% or greater interest in the company
- Relatives
- Trustees and Settlors of a Trust and others who have benefited or are eligible to benefit under the Trust (except where the Trust is a charitable or non-profit body)
- Trustees of two trusts with a common Settlor
- Two persons who are associated with a third person
Evidence of Purchase
With the purchase of secondhand goods you may not always receive a tax invoice. In this case you must record:-
- Name and address of the supplier
- Date of the purchase
- Description of the goods
- Quantity of the goods
- Price paid
