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What Is Input Taxed Sales - A Comprehensive Guide

What Is Input Taxed Sales – A Comprehensive Guide

What Is Input Taxed Sales

If you own a business, you might have some doubts about what is meant by input-taxed sales. While such sales include selling goods and services, they are susceptible to a tax treatment different from GST-free sales.

Keep reading as we explain what is input taxed sales and clarify the distinction between the two types of tax arrangements.

What Does Input-Taxed Mean?

Goods and services that do not include GST in the price the customer pays but in the price of the inputs used to make or supply them are known as input-taxed sales

The seller of these types of sales cannot claim back any GST credits included in the price of the inputs. That said, any investment you make toward making an input-taxed sale is known as an input-taxed purchase.

For example, If your services involve renting a property, the expenses you cover to equip the premises before the sale are regarded as input-taxed purchases. As previously mentioned, you can neither include GST in the price of your services nor can you claim GST input tax credits on your investments in the property.

The most common input-taxed sales are:

  • Financial Supplies 
  • Selling or renting residential premises 

Financial supplies typically occur when you provide loans, grant credit to a customer, buy or sell securities, or assign or receive interest in a superannuation fund.

Selling residential premises, on the other hand, is considered an input-taxed sale if you sell existing residential premises. However, selling new residential premises makes you liable for GST on the sale.

What Is the Difference Between Input-Taxed Sales and GST-Free Sales?

While both of these goods and services sales are not liable for GST, there is an important distinction between the two.

Namely, as opposed to an input-taxed sale, you can claim credits for the GST included in the price of purchases you made to create a GST-free sale. As the final price is completely tax-free, these types of sales benefit from the ideal tax treatment.

Products and services that typically fall under such sales are basic food, medical and health services, educational courses, water, sewerage and drainage, exports, and more.

You might be interested in: “What Is a Tax Offset?

Bottom Line

Simply put, selling goods and services that don’t include tax in their price are input-taxed sales. These types of sales are similar to GST-free sales, but they differ in the accessibility of the credits on the input-taxed supplies used. While it may look like a small difference, the latter tax treatment is far more beneficial.

FAQs:

1. What transactions are input taxed?

The most common input taxed sales are financial supplies, selling or renting residential premises, and fundraising. 

2. Are input-taxed sales included on BAS?

Yes, input taxed sales are included on the business activity statement. Thus when completing your BAS, you must include input-taxed sales at G11 Total Sales.

3. What does it mean to be input taxed?

Now that you know what is meant by input-taxed sales, check if your services fall under this type of taxation. If they do, you are obliged to pay tax on the input used to sell your product or services.

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