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Newbie Registered Tax Practitioner

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My client registered his new ABN and GST registration over 12 months ago. He has now been purchasing items and paying contractors to setup a restaurant. He says about $50,000.

Is the GST claimed on these pre-established costs and a tax deduction before trading commences when the shop wont be ready to start trading until November?

 

Thanks Sally.

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Hi @Sally2017,

 

Thanks for writing to us!

 

If your clients are registered for GST, and they have started purchasing items for their business, they may be eligible to claim back the GST credits on these purchases.


Generally speaking, you can claim GST credits when the following criteria is met:

  • you intend to use your purchase solely or partly in carrying on 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 purchased
  • you have a tax invoice from your supplier (for purchases more than $82.50).

You can find more information on claiming GST credits on our website.

 

To claim GST on pre-establishment costs when setting up a company the following seven criteria must apply:

  1. the purchase must be for the purpose of bringing the company into existence or carrying on a business after it comes into existence
  2. the company must come into existence and be registered for GST no more than six months after the purchase
  3. you must become a member, officer or employee of the company
  4. the company must have fully reimbursed you for the cost of the purchase
  5. the purchase must not be used to make input-taxed sales or for private purposes
  6. the company must not be entitled to a GST credit for the purchase, if it subsequently acquires the thing from you
  7. you must not be entitled to claim a GST credit for the purchase.

You can find more information on pre-establishment costs relating to a company here.

 

If you have further questions on claiming GST you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Hope this helps.

 

 

 

 

2 REPLIES 2

Best answer

ATO Certified

Community Support

Replies 1

Hi @Sally2017,

 

Thanks for writing to us!

 

If your clients are registered for GST, and they have started purchasing items for their business, they may be eligible to claim back the GST credits on these purchases.


Generally speaking, you can claim GST credits when the following criteria is met:

  • you intend to use your purchase solely or partly in carrying on 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 purchased
  • you have a tax invoice from your supplier (for purchases more than $82.50).

You can find more information on claiming GST credits on our website.

 

To claim GST on pre-establishment costs when setting up a company the following seven criteria must apply:

  1. the purchase must be for the purpose of bringing the company into existence or carrying on a business after it comes into existence
  2. the company must come into existence and be registered for GST no more than six months after the purchase
  3. you must become a member, officer or employee of the company
  4. the company must have fully reimbursed you for the cost of the purchase
  5. the purchase must not be used to make input-taxed sales or for private purposes
  6. the company must not be entitled to a GST credit for the purchase, if it subsequently acquires the thing from you
  7. you must not be entitled to claim a GST credit for the purchase.

You can find more information on pre-establishment costs relating to a company here.

 

If you have further questions on claiming GST you can phone us on 13 28 61 between 8am - 6pm, Monday to Friday to speak with an operator.

 

Hope this helps.

 

 

 

 

Newbie Registered Tax Practitioner

Replies 0

Thanks for the replies. I saw these answers on the ATO website but thought they werent clear enough. Thats why I wrote the question here and Ive just been told the same as the website.

Point 6 states theres no GST credit if the purchase is from the owner so what does Point 7 mean?

"you must not be entitled to claim a GST credit for the purchase"?

Does this mean the individual cannot claim it back just the company?

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