Are you making these common GST errors?
- Claiming GST on bank fees and interest – there is no GST on most bank fees and interest.
- Claiming full GST on insurance – there is stamp duty included in your insurance premium which is not subject to GST.
- Claiming full GST on vehicle registration – there is stamp duty included in your registration which is not subject to GST.
- Claiming full GST on new vehicle purchases – there is stamp duty included in the purchase of your new vehicle which is not subject to GST.
- Not allocating capital expenditure correctly – items of a capital nature which are recorded to your Balance Sheet should be identified separately on your BAS. Code to CAP so that it gets picked up correctly.
- Claiming GST for unregistered suppliers – check the ABN of your suppliers by using ABN Lookup to ensure they’re registered for GST. If not, there should be no GST claimed back.
- Claiming GST on imports incorrectly – some imports have no GST, sometimes the invoice from your freight forwarder will show GST on their services only. Check the invoice carefully as if there is GST charged on the import of the goods, this may be shown as a separate line, and it may be more than the actual invoice from your freight forwarder. It can be a little tricky to record so that everything goes to the correct spot behind the scenes so check with us if you’re unsure.
- Invoices claimed more than once – ensure your bank reconciliations and checking procedures have been completed to ensure everything has been entered correctly, and you’re only claiming an expense once. If you’re using commercial software such as MYOB or Xero, there are checks you can put in place to ensure supplier invoices aren’t entered more than once.
- Not reporting correctly for accrual basis – if you report on an accrual basis, that means that you pay and claim the GST when the income and expense in incurred, not necessarily when it’s received or paid. If you have an invoice from a supplier in June that you pay in July, the GST is claimed in June (unlike Cash basis where you’d claim in July). A good way to avoid this error is to use your Purchases and Sales modules in your software which will record the expense and the payment as two entries, rather than just Spend Money and Receive Money.
- Cents recorded on your BAS – whole dollars should be reported on your BAS, cents are left out.
- Claiming GST on private expenses – GST on private expenses cannot be claim.
- Claiming GST on wages and superannuation – these amounts are not subject to GST and are recorded in a separate area on the BAS.
- Claiming GST on entertainment expenses – check with your accountant before claiming these items. Some items cannot be claimed at all, or in full, and some items are subject to Fringe Benefits Tax.
- Claiming GST incorrectly for hire purchase agreements and chattel mortgages – if you report on a cash basis, under a chattel mortgage you can claim the full GST at the time of the purchase. If you borrow under a hire purchase arrangement, the GST is claimed in each repayment over the term of the agreement. If you report on an accrual basis, you can claim the full amount of GST at time of purchase, regardless of whether it’s a hire purchase or chattel mortgage.
- Claiming the GST twice on chattel mortgages – if you’ve claimed the GST when you’ve entered your chattel mortgage into your accounting system, make sure you don’t claim it again on the repayments.
- Claiming GST on GST-Free items – some items are not subject to GST such as milk, coffee, health services, donations, etc.
- Claiming GST on items not subject to GST – such as depreciation, income tax, payments made to the ATO, payments made to superannuation funds, drawings, etc.
- Not claiming GST on cash purchases or receipts – if you receive or pay with cash, it can be easy to forget to enter these transaction in your accounting system as they don’t appear on your bank statement so not so easy to identify if they’re missing. Have a system in place so that these payments are captured and the correct GST is claimed.
- Not claiming GST on some government income – some government grants and incentives are paid to you with GST included, so this should be reported on your BAS.
- Claiming GST on residential rental properties – residential rental properties are input taxed and no GST is applicable.
Avoid GST errors
Many GST errors can be avoided by having good record keeping practices in place, and ensuring that your accounting software is set up correctly. This means that the correct ‘default’ tax codes are allocated in your Account List and suppliers. If you don’t use accounting software, we recommend Xero and Receipt Bank and can help you set it up correctly.
Review GST before submitting your BAS
Before submitting your final BAS for the financial year, review your past BAS statements to ensure everything is correct for the year. If adjustments need to be made, speak with your accountant about the best way to correct these errors – either an amendment to prior periods, or bring corrections into the current period.
GST help is available
If you’re using the services of a registered BAS Agent, such as Miss Efficiency, we can ensure your accounting software in set up correctly, data entry is accurate, and your BAS is prepared and submitted on time. Contact us for more information.