The Goods and Services Tax (GST) legislation has been in passed and is up and running since 1st of July 2000. Although there have been an effort from Australian Tax Office (ATO) to train and familiarize taxpayers about this issue, there are several businesses that still make mistakes when treating transactions and their respective GST treatment. This can lead to mistakes being made for claiming GST tax credits by tax Payers.
That said the ATO has now shifted it’s approach from that of education to enforcement and businesses, especially small businesses should do their best to ensure that transactions and their GST treatments are recorded appropriately. This may otherwise expose you to possible penalties and other charges from the ATO.
At Knight BPO we do not simply take responsibility for recording your transactions accurately but also in the most appropriate manner in adherence to relevant legislation and standards.
Some common GST mistakes to watch out for are as follows:-
- Bank Fees are treated as “input taxed” meaning the bank doesn’t charge GST to the customer. Examples of Bank Fees are (fees to open bank accounts or close them, payment orders, cheque dishonour fees or stop cheque fees, monthly bank fees, annual bank fees, fees for chequebooks, fees for loan establishment
- Superannuation – is not subject to GST and are non-taxable
- Wages are not subject to GST and are non-taxable
- Basic Food items that have not been processed are GST free – some examples are – bread and bread rolls without icing or filling, fats and oils, spices and sauces etc a more comprehensive list can be obtained from the ATO web site.
- Residential Rent
- EFTPOS, Amex, Visa card fees also known as merchant Fees- GST is charged on credit card merchant’s fees and therefore a GST credit can be claimed on these expenses;
- Government or state charges like payroll tax are not subject to GST
- Or State charge like payroll tax as an example or land tax, water rates, fees charged for filing by ASIC are meant to be recorded as GST free.
- Residential properties are input taxed, therefore Income and Expenses relating to residential rental properties cannot be charged GST by the landlords.
- Insurance related to business like Public Liability Insurance, Worker Compensation insurance etc have a stamp duty component in the premium which is not subject to GST, There is usually though GST on the actual insurance premium and this can and should be claimed is applicable.
- If your business is registered for GST – and receives grant funding (from a government body or private foundation, for example), it does not have to pay GST on the funding payment unless it makes a ‘supply’ in return for the payment.
- GST-free purchases such as basic food items, exports and some health services; Wages and superannuation payments are non-taxable supplies;
The above statement is meant to serve as a guide only, please note before making any decisions please contact a qualified Accountant or the Australian Tax Office.