Putting business asset to personal use
You need to account for GST when business assets are put to personal use, if credit for input tax was allowed on the purchase or import of those assets.
Your director takes a computer home for his personal use. This computer is the company’s business asset.
In this case, GST is accountable on the use of the computer based on its cost.
However, if the company chose not to claim input tax on the asset purchased, the personal use of this asset will not attract GST.
Your director uses the company’s car for his family outing.
The company was not entitled to claim the input tax incurred on the purchase of the car as it is disallowed under Regulation 27 of the GST Act. Hence, the company does not need to account for GST on this personal usage.
Putting business asset to non-business use
Your related company uses your large format printer to print high-resolution architectural plans for its client. This printer is your company's business asset.
In this case, GST is accountable on the use of the printer based on its cost.
However, if your company chose not to claim input tax on the asset purchased, the use of this asset by another person will not attract GST.
Accounting for output tax
To account for the output tax, you (i.e. the asset owner) have two options:
- Pay for the output tax yourself. In this case, the non-owner asset user ("asset user") cannot claim the GST as his input tax.
- Have the asset user pay for the output tax. In this case, the asset user will be able to claim the GST paid as his input tax if he can satify the conditions for input tax claim.
Unlike normal transactions, you should not issue a tax invoice to the asset user for the use of the asset. Instead, you may (with effect from 1 Mar 2013) issue a tax certificate to the asset user if:
- The asset user pays for the deemed GST output tax (i.e. option 2 above was adopted); and
- The asset user is GST-registered.
The following details must be shown on a tax certificate:
- The word "Tax Certificate";
- Description of the goods used for free and deemed GST amount based on the full cost of providing the deemed services; and
- The statement "Deemed GST on this supply is paid by the recipient."
Claiming input tax for free use of assets
You may incur GST when you use the assets of GST-registered suppliers for free. The input tax incurred on the free use of assets can be claimed if you can satisfy all the conditions for input tax claim.
No, you do not need to issue a tax invoice. However, as the business assets are put to personal use, this is deemed as a supply and you must account for the output tax in your GST return for the relevant period.