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.
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.
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.
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.