Q: Fiona Wilkes bought a car for $33,000 in October 2011 for her delivery business, with plans to use it 90% for business and 10% for personal use. Over the years, the car's usage changed. How does this affect the net amount of GST?
A: When Fiona bought the car, she got an input tax credit of $2,700 for the GST she paid. Now, let's look at each adjustment period:
- By June 2013, Fiona used the car 80% for business. This means she needs to pay back $300 of the input tax credit.
- By June 2014, she used it 95% for business. So, she gets back $150.
- By June 2015, there's no change because the repair time doesn't count.
- By June 2016, she used it 92% for business, so she pays back $60.
- By June 2017, she used it 88% for business, so she gets back $60.
Overall, after five adjustment periods, Fiona owes $150 in GST. She'll need to keep records and adjustment notes for her tax return.
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