The Goods and Services Tax has been around for quite a while and despite the effort by the ATO(Australian Taxation Office) to educate the public, the ATO receives numerous BAS that have errors and need correction.

Most of these BAS will be overclaiming GST credits, this is either due to misinterpretation of lack of GST legislation knowledge. Below are some of the most mistakes made when preparing the business activity statements.

Mistake 1: Using incorrect tax codes in your accounting software

When setting up your accounting software you need to ensure that your chart of accounts has the correct tax codes. If this is not the case then purchase, sales and payroll will all be processed incorrectly. When the figures are incorrect then the BAS automatically is completely wrong.

The general advice is that before setting up your software ensure that your tax codes are correct and set it up carefully.

Mistake 2: Using the wrong accounting method

You can register for GST either ona cash or accrual basis. When preparing the BAS if you use the wrong basis this will result in incorrect figures. If you are not sure of which basis to use double check with your tax agent or accountant.

Mistake 3: Not reporting the GST received through government payments

Some government payments like grants or incentives must include GST. These should be reported in the BAS

Mistake 4: Not reporting GST on the sale of a business asset

This is self-explanatory. If you sell your business car you need to include the GST on that sale in the BAS. However, there are some exceptions when it comes to asset sales. Refer to the ATO website for more information

Mistake 5:  Calculating incorrect income from PAYG instalments

PAYG instalment calculations can get quite complex and if you do not understand how to do this then look for professional accountants. There is a special calculation used for this

Mistake 6: Unaware of GST increase or decrease

Now this may seem this quite a silly mistake but there are records of BASs using old GST rates. So, the best option is to use an online AUS GST calculator which will always have the current rate coded into it.

Mistake 8: Incorrect input tax credits on the following:

  • Bank Fees: This type of fee is split into general charges like monthly fees or merchant fees. General fees have imputed tax so therefore there is no GST, but merchant bank charges have GST.
  • Interest Income: This type of income has inputted tax so therefore no GST should be charges
  • Purchases that free of GST: Most basic foods, some health service and overseas exports are GST free

These are some of the most common mistakes found on BAS by ATO. All of this can be avoided if you consult professionals before sending in your business activity statements. Most big businesses do have dedicated accounts so this advice applies to most small businesses who are eligible for GST.

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