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Just a little more than a decade ago, GST first appeared on the tax landscape. The appearance of GST may not have been an anniversary that warranted cake and bubbly, but did perhaps serve as an occasion to take a look at what doesn’t seem to be working so well with businesses and the GST system. Small business has, for the most part, been able to adapt to the GST regime. To help these businesses, accounting software and computer systems have been developed and widely adopted to automate many tax compliance needs. But mistakes still do happen, and the Tax Office has identified the more common GST errors and omissions that businesses make. Over-claiming credits is on the Tax Office’s radar, but also issues relating to record keeping, cash businesses and lax BAS habits. Many of the problems highlighted by the Tax Office are attributed to a misinterpretation of the legislation due to the complexity of the GST rules with the classification of taxable supplies as ‘GST-free’ or ‘non-taxable’ high on its list of examples. Here are some of the top areas to watch out for mistakes, especially for small business owners: • Claiming a credit without a valid tax invoice. Lodging a BAS without such back-up could get you in trouble, so get a duplicate invoice from the supplier. • Wrongly claiming GST credits on super or salary payments. • Incorrect claims for GST-free purchases such as basic food items, some health services or exports. • Claiming the total credits for a car bought for more than luxury care limit (maximum GST credit that can be claimed is $5,224 – any GST paid on top of that is not creditable). • Incorrectly claiming GST credits on bank fees, such as cheque book fees, annual or monthly fees. Bank fees are ‘input taxed’ so the bank does not charge GST to its customers. There is however GST on credit card merchant fees, and so a credit can be claimed for these. • Mistakenly putting in a claim for credits from government charges such as land tax, council rates, water rates, car registration and ASIC filing fees, where no GST has been included. • Not reporting GST on some government grants and incentive schemes received inclusive of GST. • Incorrectly claiming full credits on entertainment expenses when the business has elected for FBT purposes to use the 50/50 split method (which allows only 50% of input credits to be claimed). • Wrongly claiming a credit on the full cost of an insurance policy. There is a stamp duty component in the premium that is not subject to GST. • Sole traders and partnerships not apportioning input tax credits on expenditure that is for partly business and partly private use, such as vehicle expenses. These mistakes can mean some serious money. BAS preparation can be complicated by things such as transposing figures, claiming a credit even though a valid tax invoice has been lost or misfiled, and incorrectly transferring GST information between associated businesses. If you make a mistake on your BAS, it can always be fixed. Generally the way to do this is to correct a previous BAS, but in some circumstances you can make up for error on a future BAS. Ask for guidance from a professional if you wish to do this. For more information about health care insurance and professional indemnity insurance please visit our website http://www.taxforhealthprofessionals.com.au/
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