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Claiming GST on Second-Hand Goods in New Zealand

One of the more generous provisions in New Zealand's GST Act allows GST-registered businesses to claim an input tax credit when purchasing second-hand goods from unregistered sellers. This is unusual by international standards. Most countries do not allow GST or VAT credits on purchases from unregistered persons. New Zealand's approach, set out in section 3A of the Goods and Services Tax Act 1985, deems the purchase price to include a GST component that the registered buyer can claim.

How the Section 3A Credit Works

When you purchase second-hand goods from a person who is not GST-registered, the purchase price is deemed to include a GST component. You extract this using the standard 3/23 fraction. For example, if you buy a used vehicle for $10,000 from a private seller, the deemed GST content is $10,000 x 3/23 = $1,304.35. You can claim this as an input credit on your next GST return, effectively reducing your net cost to $8,695.65.

Conditions for Claiming

To claim the input credit, you must be GST-registered, the goods must be acquired for use in your taxable activity, the seller must not be GST-registered (if they are, their invoice should already include GST which you claim normally), and you must hold sufficient records including a description of the goods, the name and address of the seller, the date, and the amount paid. You do not need a tax invoice from the unregistered seller, but you do need the documentation above.

Common Uses

This provision is commonly used when purchasing: used vehicles for business use, second-hand equipment and machinery, used furniture and fixtures for offices, commercial kitchen equipment from a retiring restaurateur, and trade tools and plant from unregistered tradespeople. If the goods are only partly used for your taxable activity (for example, a vehicle used 60% for business and 40% personally), you can only claim the business-use portion of the input credit.

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Last updated: April 2026 | Rates current for the 2026/27 tax year