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Is GST Payable On BAS?

Is GST Payable On BAS

When completing your Business Activity Statement (BAS), have you ever felt like you were drowning in a sea of financial documents attempting to ascertain if the Goods and Services Tax (GST) was due? But fear not, as we’re here to illuminate this crucial aspect of Australian tax law.

In this blog, we’ll draw insights from two valuable sources—BAS and GST tips and BAS: What Is It and How to Lodge it—and provide a comprehensive understanding of GST and its implications on your BAS. So, let’s dive into the realm of GST and unravel the mysteries surrounding its applicability to your BAS.

BAS And GST Record Keeping Tips

First and foremost, it’s essential to maintain impeccable records for your business. Keeping accurate records ensures that you’re meeting your tax obligations and helps you gain a clear financial perspective of your enterprise. Here are some record-keeping tips to keep you on the right track:

  • Document Everything: Maintain records of all your sales, expenses, fees, wages, and other business costs. These records serve as the backbone of your financial accountability.
  • Appropriate Records: Certain expenses, such as motor vehicle claims, require specific records like logbooks. Ensure you have them on hand to substantiate your claims.
  • Reconcile with Bank Statements: Regularly reconcile your sales records with your bank statements to identify discrepancies.
  • Choose the Correct GST Accounting Method: Select your business’s appropriate GST accounting method. Your choice can affect your GST obligations.
  • Preserve GST Records: Keep all tax invoices and other GST-related records for at least five years. This practice ensures you have the necessary documentation in case of an audit.

GST Credits: What to Claim And What Not to Claim?

Claiming GST credits is a crucial aspect of managing your BAS effectively. Here are some key considerations when it comes to claiming GST credits:

  1. Claim Business-Related Purchases: Only claim GST credits on purchases that are related to your business activities. Personal expenses, such as food and entertainment, are not eligible for GST credits.
  2. Business and Personal Use: If an item is used for both business and personal purposes, only claim the GST credit for the business portion.
  3. Discounted Purchases: When claiming GST credits for discounted purchases, use the discounted price, even if it’s not explicitly stated on the invoice.
  4. Hire Purchase Agreements: You can claim GST credits up front for purchases made under hire purchase agreements, but this applies only if your account for GST on a cash basis.
  5. Foreign Currency Invoices: When claiming GST credits for invoices in a foreign currency, convert the amount to Australian dollars for accurate reporting.
  6. Business Changes or Cessation: If your business undergoes changes or ceases operations, you may need to repay some GST credits for business assets you decide to retain.

When Not To Claim GST Credits?

Knowing when you should refrain from claiming GST credits is equally important. Here are instances when you should avoid making such claims:

  1. No GST Included: Don’t claim GST credits on purchases that do not include GST in the price, such as bank fees, charges, and stamp duty.
  2. GST-Free Items: GST-free items like basic foods are not eligible for GST credits.
  3. Imported Goods: Unless you’re the importer of the goods and import them solely or partly for your business, refrain from claiming GST credits on imported goods.
  4. GST Group Purchases: You cannot claim GST credits on purchases made between entities within a GST group. However, GST credits are allowed on purchases between GST branches.

Invoices and Avoiding Manual Errors

Invoicing plays a critical role in GST compliance. Here’s what you need to remember regarding invoices and avoiding manual errors:

  1. Check for GST Inclusion: Ensure that GST is included on invoices you issue for sales. It’s a fundamental requirement for accurate reporting.
  2. Minimum Invoice Amount: Only claim GST credits if you have tax invoices for purchases of $82.50 or more, including GST.
  3. Accurate Counting: Ensure invoices are counted only once in your records to prevent double claiming.
  4. Prevent Manual Errors: Employ strategies to avoid manual errors, such as using the correct formulas for GST calculations, maintaining a separate GST column in your cash book, and ensuring column and row totals match your records.
  5. Digital Record Keeping: Consider using an electronic record-keeping system tailored to your business type. These systems can streamline your administrative tasks and reduce the risk of manual errors.

Completing Your BAS with Precision

When it comes to completing your BAS, precision is key to compliance. Here are some important guidelines:

  1. Enter Whole Dollar Amounts: Enter whole dollar amounts on your BAS. Leave out cents, and do not round up to the next dollar.
  2. Single Entry: Enter each invoice only once to avoid over reporting.
  3. Cash Basis Reporting: If your account for GST on a cash basis, ensure that your expenses and sales fall within the payment period.
  4. Fields Applicable to You: Complete only the fields on the BAS that are relevant to your business. If you have nothing to report in a particular field, enter zero.
  5. Double-Check Figures: If you manually complete your BAS, double-check all figures and calculations to avoid errors.
  6. Correction: Remember that you can always correct mistakes made on earlier BAS submissions.

Lodging And Paying Your BAS Promptly

Lodging and paying your BAS on time is crucial to avoid penalties. Here’s what you need to know:

  1. Due Date: The due date for lodging and paying your BAS is displayed on the statement. Make sure to adhere to this date to avoid penalties.
  2. Weekends and Holidays: If the lodgement date falls on a weekend or public holiday, you can lodge and pay on the next working day.
  3. Payment Reference Number (PRN): Use the correct payment reference number (PRN), also known as an EFT code, when making payments to the Australian Taxation Office (ATO).
  4. Communication: If you anticipate difficulties in meeting the due date, contact the ATO as soon as possible to discuss your situation.

Getting Your GST Refund and Correcting Mistakes

Understanding how to handle GST payments and refunds is crucial for your financial well-being. Here’s what you should know:

  1. GST Payment: If your BAS indicates that you owe GST, you must generally pay on the same day. Various payment methods are available, including online, mail, or in-person at Australia Post.
  2. Payment Plans: If you cannot afford the GST owed, you can potentially avoid fines by lodging your BAS on time and working out a payment plan with the ATO.
  3. GST Refund: If you’ve paid more than you’ve collected, the ATO will owe you a refund, which will be deposited directly into your nominated bank account.
  4. Correction of Mistakes: Mistakes on your activity statement can be corrected. Most can be rectified on your next statement, but certain adjustment events may require immediate attention.
  5. Time Limit: Remember that a four-year time limit applies to claiming GST credits and refunds.

Conclusion

Knowing the GST implications on your BAS is key for any business owner. By keeping accurate records, claiming GST credits appropriately, and adhering to BAS lodgement and payment deadlines, you can confidently navigate the world of Australian taxation. And if you require any help with GST/BAS lodgement, you may consult KPG Taxation. They have tax accountants who will help you so that you can easily navigate the lodgement process.

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