Since 2000 when Australia first introduced GST (yes, it’s been that long), business owners have been unsure about how it all works, what GST needs to be added to and which expenses contain GST. In fact, because there are so many different rules, many times, business owners (and some bookkeepers) guess the amount of GST if there is no receipt.
If this is you, don’t feel too bad. You’re not alone. The problem with guessing is that you never really know if it does, or does not contain GST, so most of the time, you’re only 50% correct.
Ok, so here is a short, by not totally exhaustive summary of some of the more common GST misconceptions I’ve seen:
GST on Sales
- If you are registered for GST, you must charge GST on all goods and services that are not GST Free. You can get a list of which items are GST free. GST free items are mostly food, education, medical & healthcare. Be careful with the supply of food. Raw and unadulterated food is GST free. Once food has been prepared (cooked, used in a recipe, enhanced etc), it attracts GST
- GST must be charged on all goods and services provided once the business is registered for GST. For example, you cannot sell a product without GST, then backdate your registration before the sale.
GST on Purchases
- It’s recommended you look at the receipt or invoice to determine whether there is GST included.
- Bank fees are GST free. If a bank fee has GST, the bank will usually provide an invoice.
- Merchant fees and POS fees attract GST.
- The purchase of most raw foods, health, medical, education will be GST free.
- Products from a supermarket will contain a mixture of GST and GST free items. Be sure to check the receipt and separate the amounts on the entry.
- Rent, water, rates etc. all on charged by a real estate agent contain GST.
- Workers compensation contains GST.
- Insurance usually contains GST.
- Motor vehicle registration applies GST only to part of the total amount. Be sure to check the invoice and separate the entry.
If you feel you need to review your GST allocations, do this before the end of financial year. Any errors in GST can be rectified in the June BAS.
If you would like us to review your allocations for you before the end of the year, contact us.
If you have a comment or question about GST allocations, leave it here