Purchasing second-hand can help business owners save money, support sustainability, and make practical choices.
From a tax perspective, Inland Revenue has specific rules for second-hand purchases, particularly around GST to be mindful of.
What Counts as Second-hand Goods
Knowing whether an item qualifies as second-hand determines if GST can be claimed.
Second-hand goods are items that have been previously owned and used. Examples include vehicles, furniture, tools, and equipment. Some items, however, like livestock and fine metals, are not considered secondhand for tax purposes.
When You Can Claim a Deduction
To claim a second-hand goods GST deduction, all of the following conditions must be met:
• Your business must be GST registered and using the goods in a taxable activity
• The goods must be second-hand
• The seller must not have charged GST
• The goods must be located in New Zealand at the time of purchase
• The transaction must be a genuine sale, not a lease or transfer
If these conditions are met, you can claim GST on the relevant portion of the purchase price in your GST return.
Keeping Records
Good record keeping is essential. You should keep:
• The seller’s name and address
• The date of purchase
• A description of the goods
• The price paid
Even for smaller purchases (under $200), keeping a receipt or invoice is recommended.
A Note on the Investment Boost
Second-hand items generally do not qualify for the recently introduced Investment Boost. While buying second-hand can save money and improve cash flow, your business may not get the same depreciation benefit as it would with new assets. Check how depreciation and the Investment Boost apply before making a significant purchase.
Final Thoughts
Buying second-hand can be a smart choice for businesses. GST deductions may be available in certain situations, so accurate record keeping is essential.
If you are unsure how the rules apply to your business, we can help you understand Inland Revenue guidance and ensure your GST and Tax obligations are managed correctly.
