If you’ve been introduced to the complexity of GST, welcome to the party! If you haven’t yet registered your business for GST, you’ll need to do so once your business turnover reaches $75,000 in a rolling 12 months here are the guidelines. Either way, GST is one of my specialties and today, I’m sharing the top 10 GST mistakes business owners make in their calculations.
- Claiming GST on bank fees and interest. GST is not applicable on most bank fees and interest so claiming it is a no no. When I say most – if you have a merchant facility (taking card payments) check your statement/tax invoice for thoses, there’s likely some to claim there!
- Putting through GST on GST-free items. Believe it or not, this happens all the time. GST isn’t applicable on everything. There are items free of GST like milk, coffee, and donations. Check your woolies invoice they show the total GST at the bottom and most mark the line items which items are/aren’t GST with a # or something to help you.
- Claiming GST on when the supplier isn’t actually registered. If you buy goods or services from someone and they themselves aren’t registered for GST you can’t claim any GST – because they’re not charging you any! More deets on this bigger topic here.
- Claiming GST on entertainment. If you are entertaining generally there is no GST that can be claimed. It’s always wise to get professional advice on this one from your Tax Agent! Because it can also fall into FBT (Fringe Benefits Tax).
- Claiming GST on insurance (biz or vehicles), vehicle registration and new vehicle purchases. Stamp duty is included in the cost of insurance and can be also be on vehicle purchases. This means there is no GST to claim on that portion, so you need to split it up! Vehicle rego, varies state to state, but generally there is only a tiny portion on the third party part of the rego, so not the whole rego. Best to leave the processing of your vehicle purchases to you trusty BAS Agent or Tax Agent. Cause there’s also a limit on how much GST you can claim on cars. Sad but true.
- Claiming the wrong GST on imports by mistake. OK lots of people can never get their head around this, it’s tricky! I do though completely understand it. Some lines of the freight forwarders invoices don’t have GST, although there will almost always be a huge amount of GST you can claim – more than 10%. Because you’re paying GST after the fact on something you already bought without GST. You need to be so super careful when claiming to make sure you’re claiming as much as you’ve paid – not less as it turns out so many do.
- Claiming GST the wrong way for hire purchases and chattel mortgages. There is so many if buts and hows here. Do you know how you report your BAS? If you’re on accrual, you can claim the GST upfront on both types. Reporting on Cash? Chattel Mortgage, you can claim all the GST upfront, but HP you claim as you make repayments. My advice? Speak to a wiz to give you the right advice on this one because the repercussions can be huge if you get it wrong.
- Putting GST on your personal expenses. I see so many business owners doing this and it’s time to set the record straight, your weekly grocery shop, personal subscriptions or trip to the bottle-o have a GST component, but you can’t claim it back on your business BAS. All BAS excluded my friend.
- Including GST on wages or superannuation. Yes, you need to record wages in your BAS as amounts paid to your employees but they are not subject to GST. Same goes for super, it’s a BAS excluded payment.
- Claiming GST on overseas purchases. Even if there is tax on overseas purchases, you can’t always claim them (VAT and the likes, sometimes they’re even called GST like ours). There are only some cases that you can, like on digital services/products. The only way to know is grab your invoice and check if they have a valid ABN and if that ABN is registered for GST. Sometimes they only have an ARN which means you can’t.
Are you making any of these common mistakes? Don’t worry, you’re most definitely not alone! Dive over and take a listen to my podcast Your Bookkeeping Matters, to learn more about GST and increase your knowledge business/number related matters.