Well it's that time again and while new cloud software packages like Xero make it easy for Small Business to keep their books up to date, unfortunately it cannot substitute best practice bookkeeping...we all know the analogy "..garbage in, garbage out!"
Many issues and problems continue to arise for some business operators attempting to conduct their own bookkeeping particularly for those with little or no bookkeeping experience or time to tend to their books properly. This ultimately results in more time and hassle when the books become a real mess and need major repair work.
Submitting incorrect revenues and expenditures can result in interest charges and even penalties. Some of the more common mistakes that are made when compiling GST returns are:
1. No Tax Invoice
It is essential that you have a tax invoice to back up your claims on business expenses. If you do not have any proof of the transaction, you will need permission from the ATO to claim it or possibly not be able to at all.
2. GST Free Items
There are many items and services which do not attract the GST, therefore it is not viable to include them in your claim as you will not be legally allowed to collect a return if it was never charged in the first place.
3. Uncharged GST on Bank Fees
Banks don’t charge GST on their fees so these are not eligible as a GST rebate. They can however be claimed on credit card merchant fees as these do have GST attached.
4. Wages & Super Payments
These are non-taxable supplies and have no GST attached, therefore it can be a big mistake to treat them as such as it will involve large recalculations and affect your profit and loss assessment.
5. Company Vehicles
If your car is classed as a ‘luxury car’, then it has a limit on how much of the GST can be claimed. This limit does change periodically so must be checked before submission.
6. Sale of Equipment
This includes vehicle sales, telephone equipment and business assets will be subject to the GST, much the same as any other transaction would be.
7. Residential Properties
Residential properties are input taxed, so GST can’t be claimed on any expenses that may arise from them. This being applicable for an entity registered for GST.
8. Government Grants
Where your business has received a government grant or an incentive, you will need to include it in your GST return as it must be accounted for without exception.
9. Stamp Duty
On an insurance policy, there is stamp duty that does not have any GST attached and has to be excluded from your return. The correct amount will be stipulated on the renewal form or tax invoice.
10. Entertainment Expenses
These expenses need to be treated as entertainment costs in your business accounts, and, for tax purposes, you cannot claim back the GST paid. The expenses are not tax deductible for the client portion of the cost. Only some of the total cost can be claimed as a tax deduction, and only if your business is registered for Fringe Benefits Tax (FBT).
If your bookkeeper is not alerting you of these issues, or if you doing perform your own bookkeeping and are having trouble, MUBS can help and ease the stress. This will result in better efficiency and most likely end up costing you less in the long run. Feel free to contact us and let us help you to improve your business.