GST and Income Tax Law don’t always follow suit, so be careful not to assume too much when doing your coding/reconciling your books – logic doesn’t always prevail, and there are always exceptions to the rules. Here are the most common areas in which we find errors:
- Get your chart of accounts (code list) right. You can save 99% of errors if you get a qualified bookkeeper or accountant to review your setup. They can help you get all the default tax codes right…so all you have to do is allocate the income or expense to the right code, and it will all fall into place for you.
- Loans are complicated. Generally speaking, if you take out a loan, the receipt of the loan doesn’t have any GST in it…nor do the repayments that you make on the loan. So when receiving or paying off a loan, there is no GST. The item that you have bought with the loan funds may have GST on it (and you can claim that) but anything to do with the loan itself will not. This applies to bank loans, Hire Purchase and Chattel Mortgages. It also includes insurance premium funding. The GST on the insurance premium is deductible, but the loan repayment on the insurance funding is not. The exception to the rule is a lease. In this case, you don’t own the asset, you are hiring it from the loan provider…which means there will be GST on the payments. When in doubt, call your bookkeeper or accountant.
- As a general rule, you can’t claim GST on anything that is private in nature: Food, Clothing, House Rent, Home Repayments, Directors Fees etc.
- Most Government departments are not registered for GST, so there won’t be GST on some items, eg: Motor Vehicle Registrations, Rates, Water, ASIC fees etc.
- Other tricky items are Bank Charges, Paypal fees, Google Adwords, interest, Goods or services purchased overseas. No GST on any of this stuff.
- Not all Sales have GST on them either. Basic human services like medical and health care, water, fruit, raw meat, bread etc don’t have GST in them.
- Don’t forget to include trade-ins of business vehicles and plant when you buy a new one. There is GST on both sides of that transaction.
- Don’t mix up your wages with the other business expenses. Wages, PAYG tax and superannuation don’t have GST on them, they are reported separately on your BAS…if you mix them up with the other expenses in G10 or G11, you may inadvertently claim GST on them. Wages appear at W1 and the PAYG tax deducted from your employees’ wages appears at W2.
- Above all, read the invoice. Make sure there is GST on it – sometimes you will be dealing with small businesses that are not registered.
When in doubt, consult your bookkeeper or accountant.