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Common GST Mistakes Commercial Business Owners Should Avoid

Common GST Mistakes Commercial Business Owners Should Avoid

Do you own a commercial business and find GST (Goods and Services Tax) regulations confusing? 

Are you unsure about the common mistakes that business owners often make when it comes to GST?

Well, being a reliable accounting company in Australia, KPG Taxation knows that businesses of all sizes have made costly mistakes when it comes to GST complaints.  

Even seemingly small errors can lead to interest charges, penalties from the ATO, and a tarnished reputation. 

Therefore, to avoid them, we are sharing this blog that contains some of the most common GST mistakes that commercial business owners should be aware of and avoid.

Table Summarising The GST Treatment Of Some Common Transactions

Transaction GST Treatment
Residential Rent No GST
Commercial Rent GST Applicable
Council Rates No GST
Body Corporate Fees GST Applicable
ASIC Filing Fees No GST
Professional Association Fees GST Applicable
Bank Account Fees No GST
Merchant Fees GST Applicable
Fines and Penalties Generally No GST
Donations to DGRs No GST
Gift Vouchers (Sale) No GST
Entertainment Expenses Generally No GST
Accredited Training Courses No GST
Non-Accredited Training Courses GST Applicable
Insurance Premiums GST Applicable
Insurance Stamp Duty No GST
Insurance Recoveries No GST
Let’s understand some key GST related transactions in detail.

Understanding The Difference - Residential vs. Commercial Rent

Many business owners get confused when it comes to rent and GST. 

Here’s the key difference:

  • Residential Rent:  If you’re renting a space for your home office, the rent you pay is not subject to GST. This means you don’t need a tax invoice to claim it as a deduction on your income tax return (but always double-check with your accountant first!).
  • Commercial Rent:  On the other hand, if you’re leasing a commercial property for your business, the rent does include GST. In this case, you’ll need a tax invoice from your landlord to claim the GST component on your Business Activity Statement (BAS).

Rates And Stamp Duty

For commercial property owners, the GST implications for building costs and rates can be confusing. 

Here’s a table to help you understand better: 

Note:  If you charge these rates to your tenants, remember to add GST on them in your tax invoice.

Service GST Applicable?
Council Rates No
Body Corporate Fees Yes
Water Rates No
Stamp Duty No
Land Tax No
Real Estate Management Fees Yes

Business Registration Fees

There are various business registration fees, and each has its own GST story:

  • ASIC Filing Fees: These fees, which cover company registration and business names, are not subject to GST.
  • Professional Association Annual Registrations: If your business belongs to guilds or professional associations their annual registration fees you will have to include in GST.

Bank Fees, Merchant Fees, and Credit Card Charges

These fees from financial institutions have different GST implications. Bank account fees like overdraft charges are GST-free, but merchant fees for credit card payment facilities include GST. Credit card charges may or may not attract GST depending on whether the underlying purchase is subject to GST.

Interests, Fines, And Penalties

Most fines and penalties from government bodies like the ATO and city councils do not include GST and are not tax-deductible. However, late payment interest or fees charged by suppliers may or may not include GST based on the nature of the underlying supply.

Donations And Gift Vouchers

Donations to registered Deductible Gift Recipients (DGRs) are GST-free and tax-deductible, but payments to non-DGR charities should be treated differently for GST and tax purposes.

The sale of gift vouchers should be recorded as a liability, not revenue, and does not attract GST until the voucher is redeemed for goods or services.

Entertainment And Meals

If you pay for a meal outside the office for clients or staff, it’s considered entertainment. Entertainment expenses are generally not tax-deductible business expenses. While the meal receipt may include GST, you cannot claim it on your BAS. Therefore, record these transactions as not subject to GST.

Training Courses - Accredited vs Non-Accredited

Training Courses Accredited vocational education courses delivered by Registered Training Organisations (RTOs) are GST-free, but non-accredited commercial training courses attract GST.

Insurance

Different components of insurance policies have varying GST treatments. Premiums, levies, admin charges, and broker fees include GST, but stamp duty is GST-free. Insurance recoveries are also GST-free.

Motor Vehicle

Purchases, Loans, and Leases The GST implications of motor vehicle acquisitions depend on factors like whether it is a commercial or non-commercial vehicle, new or second-hand, the purchase price versus the ATO’s luxury car limit, and the financing method (e.g., loan, lease, or cash purchase). 

Other Common GST Mistakes
  • Setting up incorrect tax codes in accounting software
  • Claiming input tax credits without a valid tax invoice
  • Using the wrong accounting method (cash or accruals)
  • Failing to report GST on government payments or asset sales
  • Not apportioning input tax credits for private use (for sole traders and partnerships)
  • Incorrectly calculating PAYG instalment income
  • Reporting capital asset purchases on the wrong BAS label

Handling your business GST matters can be tough! But to avoid these mistakes, in particular, you can rely on GST experts at KPG Taxation. Our accountants will ensure that you stay clear of costly mistakes and ensure your business remains GST-compliant.

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