GST commonly has mistakes made in it which can be costly and require other measures to correct if they aren’t caught in time.
Most of these errors are easily avoidable and often relate to the over-claiming of GST credits.
Here are the top ten common GST mistakes that can be made.
Residential rental property: Incorrectly claiming GST credits on expenses relating to residential rental properties where the entity is registered for GST.
Bank fees: Generally, annual fees, monthly fees and loan establishment fees are input-taxed, and therefore, there is no GST to claim. However, GST is charged on credit card merchants’ fees and can be claimed.
Private expenses: GST is not claimable on private expenses such as personal loans, director fees and drawings etc.
Interest: Interest paid on loan or chattel mortgage repayments or credit card payments does not incur GST and cannot be claimed.
The total cost of a business insurance policy: Insurance policies usually include stamp duty (which is GST-free), however, the rest of the policy is subject to GST. A GST credit cannot be claimed on the stamp duty part of the policy as no GST is paid.
Government fees: GST is not charged on government fees i.e., council rates, land tax, ASIC filing fees, motor vehicle registration and water rates, and therefore, GST credits cannot be claimed.
GST-free purchases: Incorrectly claiming GST credits on purchases without GST, such as basic food items, exports and certain health services is a common mistake. Remember not all suppliers are registered for GST, so check the tax invoice before claiming credit.
Entertainment expenses: Claiming the entire GST credits on entertainment expenses where the business has elected to use the 50/50 split method for fringe benefits tax is incorrect. Only 50 percent of the GST credits can be claimed.
Wages and superannuation payments: Both wages and super do not attract GST and cannot be claimed. Wages are not an expense to be included in G11; they are to be reported in W1 in your BAS. Superannuation is not included in BAS.
Sole traders and partnerships: When claiming expenses that are used for both private and business use, you must apportion the expenditure to exclude private usage.
If you find that a mistake was made on an earlier activity statement, the ATO says you are able to:
correct the error on a later activity statement if the mistake fits the definition of a “GST error” and certain conditions are met;
lodge an amendment – the time limit for amending GST credits is 4 years starting from the day after the taxpayer had to lodge the activity statement for the relevant period, or
contact the ATO for advice.
If you find this process is too time-consuming or too difficult to complete yourself, the best way to ensure that you still are compliant and avoid making these mistakes is to contact a registered BAS agent for help.
Further information about GST can be found on the ATO website
The information contained in this publication is for general information purposes only, professional advice should be obtained before acting on any information contained herein. The receiver of this document accepts that this publication may only be distributed for the purposes previously stipulated and agreed upon at subscription. Neither the publishers nor the distributors can accept any responsibility for loss occasioned to any person as a result of action taken or refrained from in consequence of the contents of this publication.