I was just recently reading that the ATO estimates that over 80% BAS reports are incorrect. Giving this some thought I felt that this would be timely being a BAS deadline this month to list the most common GST errors that I have come across in my profession as a BAS Agent.
Incorrect tax codes in your Chart of Accounts
It is advisable that you have either your BAS Agent or Accountant set up your Chart of Accounts tax codes BEFORE you use your online accounting software.
Claiming GST against all Expenses
Not all expenses have a GST component. Here is listed the most common expenses that don’t.
• Bank Charges. Bank fees, cheque book fees, annual or monthly fees are FRE. However credit card merchant fees including eWay Merchant fees ARE charged GST.
• ASIC Fees
• Google Adwords ( though this may change in the near future)
• PayPal transaction fees
• Interest and directors fees and drawings.
• Insurance Policies. The stamp duty component in the premium is not subject to GST.
• Government charges such as land tax, council rates and water rates are FRE.
• Car registration has a partial GST component and each item needs to be entered in separately to ascertain the correct GST and FRE expense items.
• Super and salary payments don’t have GST.
• Claiming a credit without a valid tax invoice. If an invoice has been lost, ring the supplier for a duplicate copy.
• Basic foods, Health services and exports don’t have GST applied to them.
• Mobile Phone charges are GST free. GST is not accounted until the recharge purchase is redeemed.
• Gift Cards are GST free and like recharges the GST is not accounted for until the cards are used to purchase goods.
• Yellow Pages (Sensis) advertising. If you pay instalments the full amount of GST is charged up front in the first invoice.
• Telephone bill. Don’t assume that GST is attributed to the total amount as some companies can include GST free items in their accounts.
• Donations are GST free.
• Secondhand goods purchased from a charitable organisation are GST free.
• If you purchase a business asset costing more than $1000, you need to report these in G10 under Capital Purchases in the BAS. Remember to use the CAP tax code and not GST.
• Selling of motor vehicles, a trade in and office equipment need to be reported in G1 (Total Sales)
I see a lot of business owners that inadvertently double dip on GST.
This is evident with the hire purchase and lease of vehicles, plant and equipment. Initially the client (or their BAS Agent or Accountant) will claim the full GST component in the first quarter that they purchased their item then they continually record on their regular monthly payments the GST or CAP on the value effectively causing them to double dip on the GST. Check your monthly repayments to ensure that you have correctly coded them accurately.
Claiming GST on purchases when the supplier is not registered for GST
Always check the source invoice to see if it has GST in it. If you are in doubt then go to the ABN lookup page, type in their ABN or type in their business name to check if they are registered. By law suppliers have to provide you with an ABN and if they refuse then you may need to withhold a amount of payment for that supplier called “No ABN withholding” which is 46.5% of the total payment owed.
FRE, N-T or GNR which is which?
Just remember use this coding FRE for GST free Sales and Purchases. For example basic food stuff, sewerage and water, eligible childcare, non commercial activities of charitable institutions and most education and health services. FRE is recorded on your BAS form.
Use coding N-T for anything not reported on your BAS like cash transfers, deposits paid, depreciation, recording stock movements, Government charges such as FID, BADT, Owners Drawing and Director Fees.
If a supplier is registered with an ABN but not registered for GST then used GNR coding.
Small Business owners need to develop good record keeping habits and avoid unnecessary mistakes. If you find this too difficult and time consuming the best way to ensure that you are preparing your BAS correctly would be to engage the services of a qualified BAS Agent.
I am a Registered BAS Agent Number 2480 65 84 and you can contact me on 0400 102 358 or email me at bookkeepingfairy@eftel.net.au. if you have any queries on GST.
Check out my website www.bookkeepingfairyperth.com.au or contact Jaleana 0400 102 358