11 common GST mistakes made in BAS Reports

The time to lodge and pay your BAS is around the corner and as you are getting busy we would like to remind you that It’s easy to make a mistake when preparing your BAS. The key is to be aware of common pitfalls so you can avoid them. Thanks to much online accounting software, preparing your Business Activity Statement (BAS*) is easier nowadays but still, the ATO has identified several mistakes commonly made in the BAS reporting form. ATO estimates that over 80% of BAS reports are incorrect.

Here are the 11 common GST mistakes made in BAS reports.

1. Accidental double dipping on GST

When it comes to hire purchase/lease of vehicle, plant, and equipment area of the BAS, the client or the accountant will claim the full GST component in the first quarter that they purchase their vehicle. When recording their regular monthly payments, the client will either continue to code it as a GST or as a Capital Expense which will lead to confusion. Both the tax codes GST and CAP appear on their BAS Reporting sheet, causing them to ‘double dip’ on the GST. Make sure you code your monthly repayments accurately by checking your purchase invoice and BAS records.

2. Assigning incorrect tax codes in your charts of accounts

This is another mistake people commit while lodging BAS. Always ask either your accountant or BAS agent to set up your Chart of Accounts tax codes before you use your online accounting software.

3. Claiming GST against all expenses

Some expenses 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.
  • 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.
  • Super and salary payments don’t have GST.
  • Basic foods, health services, and exports don’t have GST applied to them.
  • Mobile phone charges are GST-free. GST is not accounted for 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.
  • Donations are GST-free.
  • Second-hand goods purchased from a charitable organisation are GST-free.

4. Claiming GST against all sales

Some services and products in the medical and healthcare areas also do not include GST. Also, basic food for human consumption does not include GST.

5. Including wages and superannuation in G11 as a purchase

You need to report wages and superannuation in W1 on your BAS statement. They are not an expense to be included in G11, which is for non-capital purchases.

6. Forgetting to include all cash sales and purchases

You must never discount the GST when receiving payments in cash. In the areas like building and construction business, owners are obliged to submit a Taxable Payments Report annually and the ATO has a sophisticated process of cross-matching data in these areas.  Therefore, make sure you declare all cash payments.

On the flip side, make sure you discuss all genuine tax deductions and GST credits with your bookkeeper or accountant.

7. Claiming on GST for private purchases

You cannot claim GST credit on your BAS statement for the items such as personal loans, director’s fees, and any other purchase for private consumption.

8. Reporting purchases of capital items with the wrong tax code

For any business asset you purchase that costs more than $1000, you need to report in G1 under capital purchases in the BAS and not G11.  Please seek advice from an accountant, if you have any doubts.

9. Not including capital sales in G1 (Total Sales)

This includes the sale of motor vehicles, a trade-in or office equipment.

10. Claiming GST credits on purchases where the supplier is not registered for GST

You obviously can’t claim GST if the supplier is not registered for GST and not charging it on their goods and services. While 99% of your suppliers are probably registered you need to check their source invoice to see if it is a ‘Tax Invoice’ with a GST component.

You may also go to the ABN lookup page and type in the supplier’s ABN number or check their business name.

Suppliers are bound by law to provide you with an ABN number when you purchase goods or services from them. If a supplier does not quote an ABN number, you ought to withhold an amount for that supply called “No ABN withholding”.

11. FRE, N-T or GNR: Which is the right code?

Don’t fail to use the coding FRE for GST-free sales and purchases. For example, basic foodstuff, sewerage, and water, eligible childcare, non-commercial activities of charitable institutions, and most education and health services are GST free. FRE is recorded on your BAS form.

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, use coding N-T

If a supplier is registered with an ABN but not registered for GST then use GNR coding.

Get help from VKonnect Solutions

Small Business owners need to have 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 outsource your BAS preparation and lodging to an external accountant/Bas agent.

VKonnect is a reputed business process outsourcing (BPO) company based in Melbourne that specialises in providing outsourcing services to Australian businesses in a wide range of industries. We are experts in outsourcing business activities in areas such as IT, accounting, administration, and customer services/support.

Contact us for any outsourcing needs in IT, accounting, administration, and customer services/support.

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