GST on second-hand goods: buying from private sellers, Marketplace and Gumtree

Start with who the seller is

A credit is only available for GST that was actually charged. GST is charged when a seller is registered and sells as part of an enterprise. So the first question is not what the item is, but who is selling it.

• A GST-registered business (a dealer, a trade supplier, an auction house selling its own stock) includes GST in its price and gives you a tax invoice.
• A private person selling their own belongings is not making a taxable sale, so there is no GST in the price.
• A small business that is not registered for GST also charges none, even if the goods are sold in the course of business.

Buying from a registered business

This case is the easy one. If the seller is registered, you pay the GST-inclusive price and receive a tax invoice. If you are registered and the item is for use in your business, you can claim one eleventh of the price as a GST credit on your BAS, subject to private use. See tax invoice requirements.

For purchases over $82.50 including GST, you need the tax invoice to claim the credit. For a used vehicle from a dealer, the invoice should show the dealer’s ABN and that GST is included in the price.

Buying from a private seller on Marketplace or Gumtree

There is no GST in a private seller’s price, so you have nothing to claim. This is true even if the item is for business use. You can still deduct the cost as a business expense or depreciate it, using the usual rules, but without a GST credit.

Keep a record of the sale: the listing, the messages, a receipt signed by the seller, and proof of payment. A bank transfer with a clear reference is stronger than cash. See lost receipts and what you can still claim.

The special rule for second-hand goods bought to resell

There is a limited exception. If you are registered for GST and you buy second-hand goods from someone who is not registered, intending to sell them on, you may be able to claim a credit of one eleventh of the price, even though no GST was charged. The idea is to stop GST being lost on a chain of sales that ends in a taxable sale to a customer.

The rule is about goods bought for sale or exchange, not for use in running the business. A used laptop you will keep for work does not qualify. A used laptop you will clean up and sell to a customer might. Certain goods, such as items containing precious metals, are excluded, and conditions apply to the records. Read the ATO’s guidance on second-hand goods before you rely on it.

Records the ATO expects for a resale credit

Where the special rule applies, keep a record showing the date of purchase, the seller’s name and address, a description of what you bought, the price paid, and that you intended to resell. Without a tax invoice, this record is what supports the credit. Hold the records for at least five years. See record keeping requirements.

Selling second-hand goods as a registered business

When you sell, GST is generally included in your price if the sale is part of your business, even if the item was second-hand and you paid no GST on it. If you used the item mostly privately, parts of the sale may not be taxable, and the margin scheme can apply to some property sales. Ask your accountant about unusual cases.

Common traps

Two mistakes appear again and again. The first is claiming one eleventh of a private-seller price as a credit because the item is for business. No GST was charged, so there is nothing to claim. The second is skipping the paperwork on a cash purchase, then having no evidence of the date, seller or price if the ATO asks. Treat Marketplace like any other supplier and keep the trail.

How FlowFi helps

FlowFi reads your statement and flags payments to private sellers, such as a bank transfer to an individual, so you can tell which purchases have no GST in them. Upload the invoice or receipt where you have one, and FlowFi will work out the credit only where GST was charged.