The ATO can easily see if you have made a mistake in your GST return by data matching your income tax return. For instance, they can check the sales lodged in Business Activity Statements with the figures lodged in your income tax return.

BLOG: Common GST mistakes

Sales

The amount of sales and GST collected on sales can vary depending on the basis you select. If you elect to report GST on a cash basis, you must include all payments you received during the period.

If you account for non-cash (accrual) basis, you account for the full amount of GST payable on the sale on the sale whenever the earlier you invoice or receive payments.

  • Most commonly, the GST free sales (if any) is not recorded correctly in your BAS reports. Although, your GST liability will not change by reporting your GST free sales, it assists the ATO to cross check that you have reported the correct numbers.
  • You do not report the following for total sales and do not pay any GST on the following receipts:
    • Loans
    • Transfer between accounts
    • Private money or money from hobbies
    • Other entity income (for example income belonging to another business structure)
    • Salary, wages and other employment income.
    • Trust and partnership distributions
    • Capital subscription – (for example money received by a company for shares issued)
    • Amounts for suppliers made under a PAYG voluntary agreement, unless the supply is to a business that is fully entitled to GST credits for the supply.

Purchases

The most common errors reported under purchases or GST credits claimed can be:

  • Bank fees. Generally the bank does not charge GST on annual fees, monthly fees, loan establishment fees etc.. Accordingly, no GST to be claimed.
  • Residential rental property: Expenses relating to residential rental properties are not subject to GST.
  • Statutory payments or Government payments: Generally, payments made to the Government are GST free. (for example: land tax, council rates, ASIC fees, water rates etc...
  • Insurance payments: You will find a stamp duty component on your insurance policy which is not subject to GST. Accordingly, the GST on insurance payment is not necessarily 1/11th of the total amount.
  • Government grant: Any government payments like Research and Development Concession or Fuel Tax Credits are not subject to GST.
  • Employee Payments and On-costs: Wages and superannuation payments do not include GST. However, workcover payments are insurance payments and GST is to be claimed on the them other than the stamp duty component.
  • Entertainment expenses: Unless you are registered to lodge annual Fringe Benefits Returns. You will not be eligible for any GST credits on entertainment payments.
  • Motor Vehicle: If you purchase a car with a value of more the luxury car limit (Other than commercial vehicles), the GST claim is limit to a maximum amount.
  • Sole traders and partnerships: If you are claiming for expenses that are used for both business and private. You are required to make the relevant adjustments to exclude the private usage.
  • Private expenses: No GST is claimable on private expenses.
  • Council Rates, Land Tax and Water Rates: These costs are not subject any GST.

Praba Ganeshan can be contacted on 03 9793 7233 to arrange a meeting to discuss any of the above.

This article provides information general advice only.