Getting your business activity statement (BAS) right is pretty important: not only can your cash flow be affected if you don’t get the refunds you’re entitled to, the Australian Taxation Office (ATO) may even impose some hefty fines if you get it wrong. So what are the more common mistakes and how can you avoid them?
- Setting up your accounting software with the incorrect tax codes.
Getting the tax codes right from the start will prevent a great deal of pain in the future. If you get these wrong, sales, payroll and purchases will be processed incorrectly resulting in your BAS being inaccurate. Seeking some help from an expert such as your bookkeeper or accountant when setting up your software will ensure you’re not potentially incurring the wrath of the tax office down the track.
- Accidentally ‘double-dipping’ the GST.
This often happens in the hire purchase or lease of a vehicle or plant and equipment. The business owner will claim the full GST in the first quarter that they purchased the vehicle. The problem arises when they record their regular monthly payments as either GST or capital expense. Both codes appear on the BAS reporting statement resulting in a ‘double-dip’ on GST. Check your invoices carefully to ensure you code the repayments correctly.
- Claiming GST against all expenses and/or all sales.
There are some expenses such as stamp duty that are outside the realm of GST legislation and should be allocated as BAS excluded. As this appears on a number of common invoices received by businesses such as insurance and motor vehicle registrations, it can be easy to be caught out. Other examples include:
- Bank charges
- Interest income
- Government charges such as land tax, council and water rates
There are also some items and services that don’t include GST such as health care and medical services, and basic food for human consumption.
- Claiming GST on private purchases.
Many business owners make the mistake of claiming GST on items that are for private benefit such as personal loans, vehicles not used for business purposes or 100% of home electricity and phone expenses. Keeping accurate records and ensuring your personal and business expenses are kept separate will mitigate this problem.
- Claiming a credit without a valid tax invoice or when the supplier is not registered for GST.
This is a bit of a no-brainer but you would be surprised the number of business owners who try to claim GST when they’re not entitled. Given the ATO’s constantly improving data-matching capabilities, this is a risky strategy which could lead to penalties.
- Lodging your BAS late or with missing data.
If you don’t submit your BAS on time you may be liable for a ‘failure to lodge’ penalty, which may be higher if you’re consistently late. If your BAS has missing or incorrect data, you will also be penalised, the amount depending on whether it’s a genuine mistake or a deliberate deception. Qualifying your GST reports against other areas of your system, e.g. ensuring all your bank accounts reconcile, that your outstanding sales/purchases reports are accurate and checking the figures reportable against the balance sheet control accounts for GST will help ensure your data is accurate. Getting assistance from an external bookkeeper who is a registered BAS agent will also ensure your reports are submitted on time and with the correct data.
- Forgetting to include cash sales/purchases.
As previously mentioned, the ATO has sophisticated data-matching capabilities so don’t try to discount the GST when receiving cash payments. Similarly, when paying cash for goods and services, ensure you receive a receipt or invoice which clearly states the amount of GST included. Again, accurate record keeping will ensure you don’t get make this type of error.
There are many ways small business owners can slip up when it comes to completing their BAS. Even with the introduction of ‘Simpler BAS’, there are multiple opportunities for you to be caught out, and with the ATO scrutinising tax returns more closely, it’s vital to get it right. As registered BAS agents, we can ensure your BAS is correct every time so get in touch to see how we can help.
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