Avoid these Common Errors on Your BAS

There is clear evidence that business owners continue to struggle to complete their Business Activity Statements (BAS). All too often they are penalised for failing to record their income correctly or they lodge their BAS’s late. Penalties now automatically apply for late lodgement at the rate of $170 every 28 days or part thereof (to a maximum of $850). Higher penalty rates apply to medium or large taxpayers.

To help you we have identified three common errors that small business owners make regarding the preparation of their Business Activity Statements.

Do You Need to Register for GST?

Before we address the errors, do you need to be registered for GST? If your business looks like it will earn more than $75,000 income in the next 12 months, you must register for GST. Below that threshold, registration it is optional unless you provide taxi travel for passengers in exchange for a fare - note that Uber is now under the general classification of Taxi. Once a business is registered for GST their reporting obligations continue while they remain registered. You can cancel your GST registration when the income of the business falls below the $75,000 threshold except in these circumstances:

·  the business is operated by an individual who provides taxi, uber travel,
·  the registered individual is a bankrupt and is required to be registered for GST,
·  the business is in liquidation and is registered for GST, or
·  the individual is an Australian resident who acts as an agent for a non-resident that is registered or required to be registered for GST.

1. Incorrect Business Expense Classifications

Not all expenses are subject to GST so you need to be careful with your expense allocations. We have seen many businesses incorrectly claim back GST on expenses that are free of GST including staff wages, superannuation, motor vehicle registration, ASIC fees, interest, director fees, owner’s drawings and bank charges. Wages are a business expense and are reported at W1 on your BAS but are not included in the general expenses reported at G11 which is for non-capital purchases. Superannuation expenses are not required to be included as part of your gross wages at W1.

If you purchase business assets costing more than $1,000, you need to report these in G10 under capital purchases in the BAS and not at G11.

2. Treatment of Vehicle and Equipment Finance Loans

Another common error that business owners make on their BAS is the treatment of repayments on vehicle and equipment finance loans. Chattel mortgages and lease payments are tricky areas on the BAS and they have different GST implications. If you finance by chattel mortgage you can potentially claim the full GST component of the purchase price of the asset in the next BAS after acquiring the vehicle or piece of equipment. The monthly repayments are free of GST. However, with a lease, the lessor retains ownership of the asset so you can’t claim the GST on the purchase price but your monthly lease rentals are subject to GST.

3.  Claiming GST Credits On Expenses But the Supplier is Not GST Registered

You obviously can’t claim GST if the supplier is not registered for GST and not charging it on their goods and services. While 99% of your suppliers are probably registered you need to check their source invoice to see if it is a ‘Tax Invoice’ with a GST component.

Meet The Deadlines!

Late lodgement of Business Activity Statements has reached epidemic proportions in this country. If you’re registered for GST, you need to lodge a Business Activity Statement either monthly (on the 21st of the following month), or quarterly according to this schedule:

If you need any help preparing you BAS please don’t hesitate to contact our office.