For all businesses, it’s essential to understand goods and services tax, but with various rules and guidelines, it’s easy to get confused. Many business owners ask: what are the common GST mistakes when reporting GST? And, more importantly, how you can avoid making GST mistakes? In this blog post, we’ll explore the most frequent GST mistakes that businesses make. From minor oversights to more significant wrong calculations, we’ll divide them individually. Apart from addressing these mistakes, we’ll provide you with strategies to ensure your GST reporting is as hassle-free and accurate as possible. Therefore, if you want to better understand goods and services tax and avoid common mistakes, read on.
What is a GST error?
A GST error refers to a wrong calculation when checking out the net amount on an activity statement. This error relates to the amount associated with GST, GST adjustments, or GST credits, not a transaction’s gross or GST-inclusive price. It is also crucial to note that GST errors don’t cover errors related to other taxes, such as wine equalisation tax, fuel tax credits, or luxury car tax. Therefore, it’s essential to engage a reliable tax accountant when filing a GST return. By engaging tax return accountant Melbourne, you can be sure to file GST returns on time and accurately.
What are the types of GST errors?
Incorrect GST calculations can cause financial discrepancies for businesses. These errors typically fall into two main categories, each with distinct financial implications. Understanding these categories is essential for businesses seeking accurate GST compliance. The specific errors are outlined below:
Credit error
If you make a mistake in working out your GST net amount that results in you paying too much GST for the reporting time period. Here are the examples of credit mistakes:
- reporting a GST sale two times
- overstating the GST on sales and the refund of the overstated GST is not limited.
- Understating or omitting a decreasing GST adjustment or overstating an increasing GST adjustment.
You can make corrections if you have made a credit error, on a later BAS if it is within the credit error time limit. You can also get in touch with a tax accountant to deal with GST lodgment to avoid making errors. When looking for a ‘tax accountant near me’, ensure asking them if they are experienced in handling GST matters.
You can correct a credit mistake on a later BAS that is lodged within the period of review for the earlier reporting time period. The period of review starts when you file your BAS and ends 4 years and one day later. If a credit mistake is associated with GST credits, there is an additional time limit. You can’t make a correction to claim additional GST credits where the 4-year credit time limit has expired for claiming those GST credits.
Debit error
There are two ways you can make a debit error: by miscalculating your net amount and reporting or paying too little GST for the reporting period. Here are some examples:
- Not including GST on a taxable sale
- Understating the GST on sales (for example, reporting a lower amount for GST on sales instead of the correct amount)
- Overstating GST credits (for example, claiming GST credits for a purchase twice)
- Leaving out or understating a GST adjustment that increases, or overstating one that decreases.
A debit error may be corrected in a subsequent BAS, provided the following criteria are met for each individual error:
- The correction falls within the allowable time frame for debit errors.
- The total value of all debit errors stays within the permitted threshold.
- The error was not caused by reckless behavior or a deliberate disregard for GST laws.
There are specific timeframes for fixing debit errors, which start from when the error was made, not when it was identified.To be eligible for correction in a later BAS, the error must be amended within the applicable time limit, which is determined by your current GST turnover. For GST return lodgment, you must have accurate records, which can be arranged by a trusted bookkeeper. You can also speak to a Melbourne bookkeeper to keep your records accurate for GST return.
Conclusion
GST errors can lead to costly issues, but most can be fixed if caught in time. Understanding common mistakes like misreporting GST credits or sales and keeping accurate records is essential. To stay compliant and avoid penalties, consider working with reliable Melbourne accountants.