Below we have outlined a procedure to help you manage the GST component of your activity statement:
- Where accounting software has been used by the client (such as MYOB, QuickBooks, Xero), ensure that transactions for the period (month or quarter) have been entered, and any applicable bank accounts and credit card accounts have been reconciled to bank statements.2. Complete the following verification checks:
- Ensure that GST has been charged on all taxable supplies, and that the records or data file correctly records the GST treatment of all supplies (that is, the GST control account contains all GST collected)
- Ensure that a valid tax invoice is kept for all input tax credit claims where the purchase cost more than $82.50 (GST-inclusive).
- Ensure that the input tax credit per the control account has been agreed to the GST included in the acquisition per the tax invoice.
- Where a hire purchase is in place and GST is accounted on a cash basis, the entitlement to an input tax credits differs depending on whether the agreements are entered into before or after 1 July 2012.
- Before 1 July 2012. You may be eligible for input tax credits based on the principle amount paid during the period – there is no GST component on the interest charge if the supplier separately identifies and discloses the interest charge (can be communicated by way of a dollar amount or interest rate or any other information sufficient to work out the interest charge amount). However, the interest component will include GST if the supplier does not separately identify and disclose the interest charge.
- After 1 July 2012. You may claim input tax credits upfront instead of waiting until each instalment is paid. All components of the supply (including interest, any associated fees and charges such as late payment fees) are subject to GST regardless of whether the amounts are separately disclosed.
- Make sure that the GST control account only contains valid input tax credit entitlements.
- Avoid processing journals to the GST control accounts and ensure that the transactions are processed using the GST codes. This is because any amounts processed directly to the GST control accounts may not be included when the GST reports are generated as some software only pick up the GST amounts using the transaction codes.
- Ensure inter-entity loan accounts are reconciled to pick up GST in the relevant entity for any payments made on behalf of the respective entity.
- If the entities are grouped for GST purposes, GST should not be picked up on inter-entity transactions.
- Clear any suspense or unknown transactions prior to finalising the BAS.
- Always perform the following verification checks:
- if the amount reported at G1 is GST exclusive, 1A is less than or equal to 10% of the amount at G1.
- if the amount reported at G1 is GST inclusive, 1A is less than or equal to 1/11th of the amount at G1.
- if the amount reported at G10 and G11 is GST exclusive, 1B is less than or equal to 10% of the amount at G10 and G11.
- if the amount reported at G10 and G11 is GST inclusive, 1B is less than or equal to 1/11th of the amount at G10 and G11.
- Check that the GST paid/received by the ATO has been allocated against the respective liability account and not picked up as income.
- Ensure that GST on all cash payments and receipts are also included.
2.1. Don’t assume that you are entitled to an input tax credit of 1/11th of all acquisition. This will not be the case where the acquisition is:
- input taxed (such as bank fees)
- a GST-free supply (such as some food items)
- exempt taxes, fees or charges (such as rates)
- from an supplier that is not registered for GST
- real property acquired using the margin scheme
- a luxury motor vehicle (claims are limited to 1/11th of the motor vehicle cost limit for the year ($57,466 for the 2014 income year). This does not apply to luxury motor vehicle leases.
- private or partly private acquisitions (note that eligible clients can claim 100% of input tax credits and make an annual private apportionment); or
- non-deductible expenditure, such as entertainment expenses
Claims should be adjusted for these where appropriate.