The Top Five GST Bookkeeping Mistakes

Bookkeeping may not be the most glamorous of jobs but it is necessary to keep your business ticking over nicely and the tax man at bay. Here are five common GST bookkeeping mistakes that can be made when doing DIY bookkeeping.

Claiming GST without valid tax invoices

Under Australian tax law, you can claim a GST credit for purchases that cost in excess of $82.50 (including GST) but you must be registered for the GST and have a valid tax invoice (or recipient created tax invoice (RCTI). If you use an incorrect or incomplete tax invoice to claim a GST credit, the GST credit may not be allowed.
To claim GST credits for purchases that cost $82.50 or less (including GST), you must keep documents such as cash register dockets, receipts or invoices to support your claims. You must also keep your tax invoices and other GST records for five years.
To find out more about tax invoices, contact the Australian Tax Office.

Claiming GST without realising that your supplier is not registered for GST

A business in Australia is only required by law to be registered for the GST if their GST turnover is $75,000 or more ($150,000 or more for non-profit organisations) and/or if you provide taxi travel as part of your business, regardless of your GST turnover. Taxi travel means transporting passengers by taxi or limousine for fares.
However, a business with less than less than $75,000 ($150,000 or more for non-profit organisations) can also opt to register for the GST.

Your supplier must be registered for GST before you can claim a GST credit on a purchase. Ask the supplier whether they are registered for the GST or ring the Australian Tax Office for more details.

Claiming GST credits for full amount of purchase when goods are used partially for private purposes

You are allowed a partial GST credit for the GST you pay in the price of things you use partly for business purposes and partly for private purposes such as a motor vehicle.

The amount of the GST credit you are entitled will depend on how much you use the purchase for business purposes.

In addition, if you account on a cash basis and have not paid for the purchase in full, you can only claim a credit for the GST included in the amount you have paid.

Short-changing yourself by not claiming valid GST tax deductions

Business owners often pay for expenses out of pocket or with their own personal credit card then make the mistakes of failing to track these expenses. They may then fail to submit the expenses to the company for reimbursement or lose tax invoices.

A qualified bookkeeper or accountant will be able to track all expenses, keep up to date with all current tax legislation and be able to advise you what GST you can claim so you can receive the maximum rebate from the government come tax time.

Not keeping accurate GST records

The stereotype of a small business owner keeping their invoices in a shoebox unfortunately still rings true for a lot of small business owners. By employing a bookkeeper, using commercially available software used for bookkeeping records and keeping GST records up to date, you will be able to monitor your GST and simply your Business Activity Statement (BAS).

GST is claimed when you lodge your BAS and the exact period you claim it will depend on whether you account for GST on a cash or accruals basis and your annual turnover.

If your turnover is less than $2,000,000 and you are a small business, you may elect to lodge your BAS either monthly, quarterly, or annually. If you’re turnover is more than $2,000,000 you must lodge monthly.

By monitoring your GST and keeping accurate records, you will be ready to lodge your GST claim on time and reduce any tax liabilities.

There are many advantages to having a bookkeeping service and just one of these is to make your GST less taxing and make it easier for you to record all your GST transitions and claim for all legitimate GST deductions. By leaving it to the experts, you can ensure your GST is done correctly and on time and you can concentrate on running your business.

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Comments

6 Responses to “The Top Five GST Bookkeeping Mistakes”
  1. Jacob says:

    Hi I am just wondering how you go about recording gst if you are not registered, for example.

    If a business is not registered for gst and they purchase an asset from a business that is registered. Assuming the asset is purchased for $110 inc gst can you write off the $10 paid as an expence as to recored the actual value of the asset and effectivly reduce profit and theirby paying less tax at the end of the year?

    If this is not what is generally acepted how to I overcome this problem?

  2. cmatsuki says:

    Unfortunately you cannot claim the GST credits, if you are not registered for GST in the regular BAS statements. But you can claim the extra 10% in the tax return.

    If you have any other questions, please let us know.

  3. jagdeep says:

    Can company claim the GST on the Management fee Invoice?

  4. Dave says:

    cmatsuki, I think you will find that if you are NOT registered for GST you CAN claim the GST portion as an expense.

    Example: if you are NOT registered for GST and you purchase an item (e.g. stationery) for $110 Inc GST then you would allocate the whole amount ($110) to the Stationery expense accounts. There is obviously no allocation to the GST Paid account as your are NOT registered for GST.

  5. Chris says:

    Stupid question; if I’m not registered for GST that doesn’t mean I don’t pay GST right? Being “registered for GST” really means being registered to use GST credits/offsets, right?

    Where’s the best place to go if you’ve started a small consultancy business on the side, and want to make sure you’re complying will all applicable laws etc re: tax/super/etc?

  6. cgillette says:

    That is correct. You cannot claim the GST credits if you are not registered for GST in the regular BAS statements. But you can claim the extra 10% in the tax return.

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