Common GST mistakes - lessons from Australia

Business entities in Malaysia will have to comply with GST requirements effective 1 April 2015. 

Despite the months and even years of preparation, mistakes are likely to happen. 

Below is a good article on common GST mistakes - Australian experience (GST started in Australia in year 2000):


Here are some of the mistakes the Tax Office has noted being made by small businesses. The list is not exhaustive, but may serve to underline areas that others have come to grief on – so you don't make the same blunders.

• Claiming a credit without a valid tax invoice. Lodging a BAS without such back-up could get you in hot water, so get a duplicate invoice from the supplier. The Tax Office has (from July 1, 2010) given some slack to the regulations, but still...
• Wrongly claiming GST credits on super or salary payments.
• Incorrect claims for GST-free purchases such as basic food items, some health services or exports.
• Claiming the total credits for a car bought for more than the luxury car limit. The maximum GST credit that can be claimed is $5,224 (one eleventh of the depreciation limit of $57,466). Any GST paid on top of that is unfortunately not creditable, however the unclaimable GST amount may form part of the cost of the car for tax depreciation purposes.
• Incorrectly claiming GST credits on bank fees, such as cheque book fees, annual or monthly fees. Bank fees are 'input taxed' so the bank does not charge GST to its customers. There is however GST on credit card merchant fees, and so a credit can be claimed for these.
• Mistakenly putting in a claim for credits from government charges such as land tax, council rates, water rates, car registration and ASIC filing fees, where no GST has been included in these.
• Not reporting the GST on some government grants and incentive schemes that are received inclusive of GST.
• Incorrectly claiming full credits on entertainment expenses when the business has elected for FBT purposes to use the 50/50 split method (which allows only 50% of input credits to be claimed).
• Wrongly claiming a credit on the full cost of an insurance policy. There is a stamp duty component in the premium that is not subject to GST (although the actual amount of GST should be spelled out on the renewal form).
• Sole traders and partnerships not apportioning input tax credits on expenditure that is for partly business and partly private use, such as vehicle expenses. Small businesses (with annual turnover up to $2 million) that lodge for GST quarterly or monthly can apportion private use annually rather than with each BAS.

For a good proportion of the above problem areas, accurate record keeping will go a long way to making sure these sorts of errors cannot slip through. But a weather eye will still need to be kept on one-off or sundry items not in the usual ambit of the business's core transactions, and that may not be accounted for correctly.

Source: Common GST mistakes (www.taxpayer.com.au)

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