Requirement to Account for GST
A supply of services is made when your business assets are put to non-business or private use, whether or not there was any consideration (e.g. money) received. Where no consideration is received, you are deemed to have made a supply on the free use of your assets unless no input tax was claimed on the purchase or import of the assets.
The GST you should account for on the deemed supply would be based on the full cost to you of providing the services.
Example 1: Private Use of Computers
A director takes a computer home for his private use. This computer is the company's business asset.
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 computer purchased, the private use of the computer will not attract GST.
Example 2: Private Use of Company Car
A 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 (General) Regulations.
The company does not need to account for GST on the private use of the car as no input tax was claimed.
Accounting for GST
As the asset owner, you have two options:
- Pay for the GST 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 GST. In this case, the asset user will be able to claim the GST paid as his input tax if he can satisfy the conditions for input tax claim. He must maintain a tax certificate to support his claims.
Tax Invoices and Tax Certificates
Unlike normal transactions, you should not issue a tax invoice to the asset user for the use of the asset.
Effective 1 Mar 2013, you are allowed to issue a tax certificate to the asset user when:
- The asset user pays for the deemed GST output tax (i.e. option 2 above was adopted); and
- The asset user is GST-registered.
Details on the Tax Certificate
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
Do I need to issue tax invoices when I put a business asset to personal use?
No, you do not need to issue a tax invoice.
However, as the business asset is put to private use, this is deemed as a supply and you must account for the GST in your GST return for the relevant period.