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GST – Are you making these common reporting errors?

The ATO recently identified the five most common GST reporting errors. If you want to avoid making these errors and learn other ways to prevent mistakes in your activity statements, read on.

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The ATO recently revealed the five most common errors made during GST reporting. These five errors represent over half of GST reporting corrections and are largely due to client error. But don’t be alarmed—most of these mistakes can be avoided with simple checks.

According to the ATO, these are the key checks you should make before lodging your BAS:

  • ‘make sure the timing is correct, and report for the correct tax period
  • check the figures to avoid accidental miscalculations and simple transcription errors
  • ensure your clients can substantiate their claims for GST credits
  • check there is a creditable purpose, so your clients do not claim GST for goods purchased for personal use
  • make sure your clients charge GST when they need to, including your businesses clients that may not realise they will pass the $75,000 GST threshold.’

We discuss these in further detail below. For further ATO guidance, refer to QC 43356 – Avoiding common errors.

Common reporting errors

Timing

It is important to review the transactions for your sales and purchases to ensure they are being reported in the correct tax period (referred to as ‘attribution’ in GST law). Note: the attribution rules differ depending on whether you account for GST on a cash or accruals basis, and there are special rules for adjustments.

You should also double check the period you are submitting for before lodging your BAS. Submitting a BAS for the wrong tax period can be an easy mistake to make, particularly if you have any previous statements overdue or are lodging multiple statements at once.

Miscalculations and typos

When you review your activity statement, the calculated refund or payable may not be what you were expecting. Check your calculations—you may have miscalculated a transaction or made another error. A simple typo can also lead to an incorrect payment or refund amount, so remember to check for transcription errors too.

Substantiation

You must have sufficient substantiation of your purchases to claim GST credits. For purchases over $82.50 (GST inclusive), you will need a tax invoice to claim a GST credit for that purchase. Although there is no requirement to hold a tax invoice for purchases less than or equal to $82.50 (GST inclusive), you will still need sufficient substantiation required. For more information on the substantiation, refer to our GST Q&A – Tax Invoices for credit card transactions below $82.50.

Creditable purpose

You cannot claim GST credits on purchases that are for private purposes, so check that the purchases you are claiming for have a creditable purpose. Where a purchase is only partly for private purposes, you can only claim a GST credit on the portion of the purchase that is for creditable purposes.

This issue only arises for sole traders. Generally, where a corporate entity makes acquisitions, there will be no private purpose. However, if it relates to an employee then FBT needs to be considered.

GST registration threshold

Some entities make the mistake of not accounting for GST because they don’t realise that they will pass the $75,000 GST registration threshold. It is important to revisit the issue of whether your entity needs to start accounting for GST, particularly through stages of significant change or growth.

I’ve made an error but already lodged the BAS: What do I do?

If you’ve picked up on an error but have already lodged your BAS, the ATO has provided a useful administrative concession dealing with how you can correct the error or mistake. QC 16233 – Correcting GST errors provides guidance on how to correct GST errors, including whether those errors can be corrected in a subsequent BAS or whether the original BAS needs to be amended. The timing and quantum of the errors are important in this regard. Therefore, if you have made GST errors or mistakes, we strongly recommend reviewing this guideline.

Disclaimer: This article is based upon information available as at the time of publishing and may be subject to change.