At Accounts All Sorted, we help businesses navigate the complexities of Goods and Services Tax (GST). In this blog post, we address ten common GST mistakes and provide essential insights for accurate reporting.
Whether it’s navigating through erroneous claims on GST-free items or unravelling the complexities of GST on overseas purchases, we’ve got you covered with essential insights to ensure your GST reporting remains accurate and fully compliant.
Join us to avoid errors, stay GST compliant, and make informed financial decisions. Let’s embark on this GST adventure together!
Claiming GST on Bank Fees and Interest
It’s important to note that GST generally doesn’t apply to most bank fees and interest charges. Therefore, attempting to claim GST on these items is not allowed. However, if you have a merchant facility for accepting card payments, it’s worth reviewing your statement or tax invoice. In some cases, there may be specific fees related to your merchant facility that are eligible for GST claims.
Claiming GST on GST-Free Items
Believe it or not, it’s a common mistake to apply GST to items that are exempt from it. GST does not apply to certain goods and services such as milk, coffee, and donations. When reviewing invoices, particularly from major retailers like Woolies, take note of the total GST displayed at the bottom. Additionally, many invoices mark line items with a # or similar symbol to indicate whether they include or exclude GST.
Claiming GST from Unregistered Suppliers
If you purchase goods or services from a supplier who is not registered for GST, you cannot claim any GST. This is because they are not charging you GST in the first place. It’s essential to ensure that your suppliers are registered for GST if you intend to claim it as an input tax credit. For further details on this topic, consult a professional tax agent or explore relevant resources.
GST and Entertainment Expenses
In general, there is no GST that can be claimed for entertainment expenses. However, it’s advisable to seek advice from a tax agent as there may be exceptions or situations where entertainment expenses can potentially be subject to GST or fall under Fringe Benefits Tax (FBT).
GST on Insurance, Vehicle Registration, and New Vehicle Purchases
When it comes to insurance for businesses or vehicles, vehicle registration, and new vehicle purchases, it’s important to consider the inclusion of stamp duty in the cost. The portion attributable to stamp duty does not include GST, so you cannot claim GST on that specific portion. It’s recommended to consult a BAS Agent or Tax Agent for assistance, especially with vehicle purchases, as there are limitations on the amount of GST that can be claimed for cars.
Accurate GST Claims on Imports
Claiming GST correctly on imports can be confusing for many people. It’s crucial to ensure that you are claiming the correct amount, considering that some lines on freight forwarders’ invoices may not include GST. Despite this, there is often a substantial amount of GST that can be claimed, exceeding 10%, as you are paying GST on goods or services you already purchased without GST. Take extra care when making claims to ensure you are claiming the correct amount you have paid.
Proper GST Treatment for Hire Purchases and Chattel Mortgages
The treatment of GST for hire purchases and chattel mortgages involves various considerations. The reporting method used for your Business Activity Statement (BAS) plays a role. If you report on an accrual basis, you can claim the GST upfront for both types. For cash reporting, you can claim all the GST upfront for chattel mortgages, but for hire purchases, GST can be claimed as you make repayments. It is strongly advised to seek guidance from an expert to ensure you handle these situations correctly, as incorrect treatment can have significant repercussions.
Personal Expenses and GST
It’s important to clarify that personal expenses, such as your weekly grocery shopping, personal subscriptions, or purchases from liquor stores, contain a GST component. However, you cannot claim back the GST on these personal expenses in your business BAS. The BAS excludes personal expenses from GST claims.
GST and Wages or Superannuation
While you need to include wages as amounts paid to your employees in your BAS, they are not subject to GST. The same applies to superannuation contributions, which are also excluded from GST.
GST on Overseas Purchases
Not all overseas purchases are eligible for GST claims, even if they may have a tax similar to GST (e.g., VAT). To determine if you can claim GST on overseas purchases, check if the invoice includes a valid Australian Business Number (ABN) and if that ABN is registered for GST. If the invoice only includes an Australian Registered Number (ARN), you cannot claim GST. To ensure accuracy, always review the relevant invoice and associated details.
At Accounts All Sorted, we’re dedicated to empowering businesses with the knowledge they need to thrive in the ever-changing world of GST. If you need assistance preparing and lodging your Business Activity Statements, please contact us today.Talk To Us Today