GST Update - Lodging your first Business Activity Statement
By Sabina Donnolley
Your first Business Activity Statement (BAS) is
due for lodgment on 11 November 2000.
Following are 10 things you must remember
to do in relation to its preparation.
1. Record Keeping
The Commissioner has advised that everyone who
lodges a BAS will eventually be audited. The audit
will be for an individual BAS for a particular
month or quarter depending on your lodgment
requirements.
Good habits and good intentions in the beginning
will reap rewards later. Buy a ring binder and file
all your receipts and payments in month order
behind each BAS. Be sure to file the summary
BAS with the quarter's documentation. This
provides an audit trail and makes substantiation of
your claim easier. Remember, you must keep these
records for five years.
2. Cash versus Accruals
You will be categorised as being on a cash basis if
your turnover is less than a million dollars. Your
GST calculation is quite simple. If you haven't
paid for it you can't claim the GST, and if you
haven't been paid it, you can't say you collected
the GST.
The Accruals basis is for companies or individuals
with a turnover of more than one million dollars.
It incorporates the fundamentals of accounting for
debtors and creditors. You therefore need to
ensure that you have recorded every single invoice
rendered for the period and every expense
incurred which recognises both sides of the
transaction, and the total GST liability.
3. Invoices
If it's not a tax invoice or not in the correct format
you cannot claim the GST. Tax invoices must
specify the supplier's ABN, have the words Tax
Invoice, the name of the supplier and a description
of the services. GST can be included or specified
separately on the invoice.
4. Amounts
Less than $50
For amounts less than $50 you do not need to
obtain a tax invoice to claim the GST paid. These
receipts are usually for expenditure which you
claim percentage of business usage e.g. petrol
receipts.
I suggest for the first quarter you look at keeping
these receipts and working out reasonable
percentages of usage based on some form of
record keeping.
5. Motor Vehicles
If you purchase a new car you cannot claim the
GST in this first 12-month period. Purchases in
the second year are entitled to a 50% claim, third
year is 100% claimable.
6. No GST Incurred or GST Free
You do not charge GST on input tax supplies and
you are not entitled to a tax credit in relation to
these supplies. Examples are bank charges and
interest paid.
Transactions with no GST include salaries,
superannuation and rent paid for non-commercial
premises. This means that you don't record any
GST in relation to these transactions.
7. Credit Cards
A credit card statement does not constitute a tax
invoice in relation to the claiming of the input tax
credits. Therefore it is worth remembering that
you must keep all the dockets and I suggest that
you attach them to the back of the credit card
statement for that month. This forms an audit trail
and enables the GST to be reconciled easily back
to the tax receipt.
8. Wages
Most small businesses have historically adjusted their
wages according to their needs and cash flow. This
has changed dramatically with the implementation of
the quarterly reporting of the BAS. You are now
required to notify the tax office in the box marked
W2 on the BAS, the gross amount of wages for the
first quarter together with the group tax withheld.
The simplest way to do this is to estimate a salary
for the year, e.g. $50,000, divide it by four and
work out the group tax accordingly. It will be
possible to adjust this salary each quarter.
9. Installment Tax
The most difficult tax to understand is the PAYG
installment tax on the BAS. This is at box T1. This
replaces the old company tax or individual
provisional tax and is now paid as you go rather
than in arrears. The Commissioner has kindly pre-printed
on the forms an installment rate.
If there is
no rate shown then no tax is due for this quarter.
The rate is based on the last tax return lodged. In
most cases it will be the 1999 return unless you
have been particularly quick in lodging your 2000
return. As the returns are lodged during the year
this rate may change on the installment notices,
based on the tax due for the 2000 year.
To calculate the installment total you need the gross
income of the period. This figure includes sales
income, interest, trust distributions and dividend
income for the first quarter. This figure is then
multiplied by the Commissioner's Installment Rate
to calculate the amount due.
If you are an individual lodging a BAS and receive
a salary, this salary should not be included as it is
taxed at source. The PAYG installment is only in
relation to an individual untaxed income.
10. Fringe Benefits Tax
Again pre-printed with the amount by the
commissioner supersedes the old quarterly
installments.
Finally, remember the first return will be the worst
for all of us. Just keep smiling.
Sabina Donnolley is a Partner in Donnolley Rush Chartered Accountants who specialise in small business accounting.
Sabina has over 20 years experience in small business accounting, tax and restructuring and recently has been working on
GST related issues. Please feel free to contact Donnolley Rush Chartered Accountants on (02) 9247 7766.
