Small business has by and large been able to adapt to the GST regime – warts and all – and accounting software and computer systems have been developed and widely adopted to automate many GST compliance needs.
But mistakes still do creep in and the Tax Office has identified the more common GST errors and omissions that businesses make. Over-claiming credits is on the Tax Office’s radar, but also issues relating to record keeping, cash businesses and lax BAS habits.
The ATO has identified a number of common mistakes found in the BAS reporting form. The list is not exhaustive, but may serve to underline areas that others have come to grief on – so you don’t make the same blunders
1. Wrongly claiming GST credits on super or salary payments.
Including wages and superannuation in G11 as a purchase. You are to report wages in W1 on your BAS statement. They are not an expense to be included in G11, which is for non-capital purchases. Superannuation is not required to be included as part of your gross wage in W1.
2. Forgetting to include all cash sales and purchases
3. Incorrect tax codes in your chart of accounts
I would advise you to ask your accountant to provide a default chart of accounts or ask a BAS agent to set up your tax codes BEFORE you begin using your online accounting software.
4. Claiming GST against all expenses
There are expenses that do not have a GST component. They include:
- Motor vehicle registrations
- Bank charges
- ASIC fees
- Paypal transaction fees
- Google Adwords
- Interest and director fees / drawings
5. Incorrect claims for GST-free purchases
such as basic food items, some health services or exports. Some services and products in the medical and health care areas also do not include GST. Basic food for human consumption do not include GST.
6. Not reporting GST on some government grants and incentive schemes received inclusive of GST.
7. Claiming the total credits for a car bought for more than the luxury car limit
(the maximum GST credit that can be claimed is on the limit amount) any GST paid on top of that is not creditable.
8. Claiming on GST for private purchases
Items like personal loans, director’s fees and any other purchase for private consumption cannot have the GST credit collected on your BAS Statement.
9. Not including capital sales in G1 (Total Sales)
This includes the sale of motor vehicles, a trade in or office equipment.
10. Claiming a credit without a valid tax invoice.
Lodging a BAS without such back-up could get you in hot water, so get a duplicate invoice from the supplier.
11. Wrongly claiming a credit on the full cost of an insurance policy.
There is a stamp duty component in the premium that is not subject to GST (although the actual amount of GST should be spelled out on the renewal form).
12. Incorrectly claiming full credits on entertainment expenses
when the business has elected for FBT purposes to use the 50/50 split method (which allows only 50% of input credits to be claimed).
As a small business owner, it’s important to develop good record keeping habits and avoid unnecessary mistakes.
If you find all this too time consuming or too difficult, the best way to ensure that you prepare your BAS correctly would be to engage the services of a qualified BAS or Tax Agent.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult your tax agent, BAS agent or accountant as each small business’ circumstance will vary.
For more articles by Katrina Brennan, visit Northlakes.com.au Vincents Blog here http://bit.ly/1t3L6Zo.
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