When you’re completing your activity statements, it’s easy to make
mistakes. It happens a lot and we see them first hand here at e-BAS
Accounts. The main mistakes users make are in relation to tax codes.
Users often use the wrong tax code when entering various transactions
into their software. Here are some common transactions that are often
coded incorrectly. We show the correct tax code application:
Bank Fees: There
are two main types of bank fees – general bank charges like monthly fee
annual fees and merchant banking fees. General bank fees are GST Free
and merchant bank fees include GST.
Motor Vehicle Registration: In Victoria, the
vehicle registration is broken up into 3 parts: Registration Fee, TAC
Charge and Duty Insurance. Only the TAC Charge includes GST; the other 2
components are GST Free.
ASIC Filing Fees: These are GST Free
Insurance Policies: Most insurance policies
include a stamp duty component. This is GST Free but the rest of the
policy includes GST. Check your renewal notices as some also include
extra fees and insurances which may or may not include GST.
Sale of Business Assets: If you sell a company
vehicle or equipment, you must include GST as part of the sale price.
There are some exceptions – go to this ATO web page for more information.
Food: Some foods are GST Free e.g. honey and
some are not e.g. pies. For more information, go to this ATO publication
which provides a comprehensive listing of the GST treatment of various
Health Services: Some health services are GST free and some are not. Once again, refer to this ATO publication for more details.
Wages & Superannuation: Neither of these items attracts GST. Wages should be reported at W1 and tax withheld at W2 on the BAS; superannuation is not included on the BAS at all.
Purchase of a Luxury Car: Each year the ATO provides the luxury car limit and the maximum amount of GST which can be claimed. You cannot claim the entire amount of GST on the purchase a luxury vehicle. Go to this ATO web page for the current figures for this current year.
Business & Private Usage: You should be determining the business usage percentage of items like motor vehicle, telephone, rent, power etc. This can be done by keeping log books or measuring floor space of your home office if you use one. Once you have a percentage to use, you should be applying this to each transaction for these items which will give you the correct of GST to claim e.g. if your business usage percentage is 50% and your telephone bill is $100.00 including GST, then you can only claim $50.00 business usage including $4.54 GST. Having said all of this, you can work out your business usage at the end of the financial year, and include an increasing GST adjustment on your BAS to account for any GST over-claim you made during the year.
Interest Income: Use ITS (Input Taxed Sale) as the tax code here.
Donations: Donations are GST Free.
There are many more items we could like here but these are the more common ones. Keep this list and refer back to it when you are unsure as to the correct tax code to use when completing your BAS.