Common GST Errors in BAS

Australian Taxation Office (ATO) is still dealing with a number of BAS returns with faulty GST claims. The errors in GST returns can be prevented by educating businesses, even though ATO has highly endeavored to supply comprehensive information on GST throughout the last decade.

Frequent errors are listed below in two main categories having the first one as the general errors and the second discussing the input tax credit (ITC) mistakes:

 

General GST Mistakes:

 

  • A great deal of errors could be prevented if the accounting software used, like Xero, are set with the right tax and GST codes. When the GST class of accounts is not defined correctly, both input and output tax recorded would be false. To prevent this to happen, having a registered creditable BAS or tax agent setting/reviewing your charts of accounts is highly recommended.

 

Prevention is Definitely Better than Cure.

 

  • Self- explanatory is the incident of claiming GST without referring to the actual invoices provided by suppliers or customers.

  • Accounting through the wrong or inapplicable method is the other cause of BAS mistake in terms of GST reporting. (hint: the accounting type can also be found on your BAS).

  • Assuming government purchases to be GST free undervalues the input tax claimed. Like self-explanatory error, delving government organization invoices will assist businesses to reduce the GST payable.

  • Sales of some capital equipment or vehicles have to be done by charging GST on the selling price. The detailed information are here

 

Similarly, buying capital items with GST amounts charged on cost must be filled in G10 part of BAS forms if the GST-inclusive sales price of more than $ 1,000.

 

  • Distinguishing the accounting treatment of business supplies between the private and business use is not sometimes taken into account by sole traders or partnership entities. Examples of these costs are amounts paid for utilities and rents, although this apportioning can be done at the end of financial year provided the total turnover to be less than $2 million per annum.

  • PAYGI calculation may be complex and the advice of registered BAS/tax professionals seems to be necessary in some occasions.

 

ITC Errors:

 

 

Error

Explanation

Bank Fees

For merchant bank fees and eWay, GST paid can be claimed. But, general bank fees and Paypal are input-taxed.

Interest income

No input GST since it is input-taxed.

Invoices with Mixing GST

Pay attention to GST free items in invoices

Motor Vehicle Registration

Only TAC charge bares GST, in Victoria. Other states must be checked.

Government charges

No GST is imposed by government on

land tax,

council rates,

water rates, and

ASIC filing fees or insurance stamp duty

GST Free Items

 

Insurance cost

Stamp duty cost is GST exempted. The other costs involved are subject to GST.

Recharges

Recharges like CityLink tolls, mobile telephones, and MYKI are GST Exempt

Gift Cards

All are GST free

advertising costs on Yellow Pages

Upon installment payment, total GST amount can be claimed only if accrual basis is used.

Telephone Bills

Figure out the exact amount from the bill

Wages and Superannuation

GST Free items. No superannuation should be filled in BAS.

Donations

All are GST free

Residential properties expenses

Be precise in looking up the GST input amounts

Entertainment costs

Since complex apply in this part, contact us for precise advices.

Vouchers dealings

Subject to GST if the voucher is redeemed.

Hire purchases and mortgages on chattels

Dealings before 1 July 2012:

Principle component of instalment is subject to GST.

Dealings after 1 July 2012:

All components are subject to GST and can be included as input GST expenses upfront.

Security Deposits

When deposit is forfeited or paid for the total price, it is subject to GST.

Second hand goods

If bought for Charity organizations, they are GST free items.

 

If bought for business purposes in a GST-registered entity, they are subject to GST.

 

If bought for non-registered entity and the cost is $300 or less, GST amount is a claimable input amount. For the costs more than $300, GST is claimable only when the goods are sold.