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Using the Business Activity Statement to tell the Tax Office how much GST you will have to pay (and that's not all)

The Business Activity Statement

Businesses with a turnover of $50,000 or more a year must register for GST before 1/5/2000. Even if you do not have a turnover of $50,000 you can still register.

Come July 2000, if you have a Business Number, you will be emailed every 3 months with a web address you can go to and lodge your details. (Businesses with a turnover of $20 million will do this monthly rather than quarterly).

So on the 23^rd day of the month prior to the end of the tax period you will either enter you details into a personalised form on the net, or on paper if you are not comfortable with the internet.

What information will the Tax Office want?

Sales and

Expenses on which GST has been paid!

Basically,

your sales for the last 3 months (you will pay 10% GST on these) and

the amount of GST you have paid on items you use in your business (you can reduce the GST you have to pay by this amount).

Your sales for the last 3 months

Most people these days will be keeping accounts on a computer using either a proprietary accounts software package or a spread sheet. If you are not, the full deductibility of the cost of a computer might be just the incentive you need to purchase one.

Most accounting packages will allow you to report on sales and expenses for a three month period.

If you use a spreadsheet, just add up the sales columns for the last three months.

If you are determined not to become computer literate, you should be able to extract the details from your bank statements.

So just enter this amount. You will have a GST liability of 10% of that amount.

(We will go through the exceptions to that statement shortly)

The business expenses on which you have paid GST

You will recall that not all items attract the GST. Food and residential accommodation are the best known of the items exempt from the GST, You would not usually be showing such amounts in your business accounts.

However there is one obvious business expense that will be free from GST - interest and bank charges. These are a special class of GST free expense referred to as input taxed supplies

But apart from these, you will get a total of all the business expenses on which GST has been paid in the last 3 months and enter this amount into the Business Activity Statement.

You will then pay the difference between the amount of GST you should have collected (10% of your sales) and the GST you have paid on items and services used in running your business.

That's a pretty crude statement so let's make it a little more rigorous.

The Business Activity Statement as far as GST is concerned!

(Remember it will contain items for all the information you must supply to the Government - not just GST)

Lets start with GST you will have to pay

Gross sales

The Business Activity Statement will ask you for details of total sales, income and other supplies, whether or not GST is applicable. So go to your accounts and extract the figures for the last 3 months for:

Sales and income where GST has been charged

Sales and income which is GST free

Sales and income which is an input taxed supply

That's the gross sales, so now deduct the sales that do not attract GST

So now we know the gross receipts, but not all of these will be subject to GST, so it will be necessary to list those amounts that can be deducted from the gross sales. These are:

Exports (including aircraft and ships taken out of Australia under their own power

Other GST - Free supplies (it is unlikely the usual business will expense any of these)

Basic food

Health, education and child care services

Cars for use by disabled persons

Religious services

Water and sewerage

Sales of going concerns

Non commercial activities of charitable institutions

Certain sales of farm land

Certain precious metals

Input Taxed sales and income and other supplies such as

Financial supplies

Residential rents

Precious metals

Long term accommodation

Add up all your GST free revenue then deduct it from the gross receipts

Is that it?

Not quite!

Time to fix up any mistakes in previous Business Activity Statements.

Add together all the adjustments you need to make to previous statements

Add adjustments to the total on which GST is payable (it might be a negative figure)

Done that?

Now divide the total by 11.

(that will give you 10% of sales or the GST you must pay)

So much for the amounts you will have to pay! But what about the GST you have paid already on acquisitions? You can use the Business Activity Statement to claim these amounts as a reduction in GST payable!

The Business Activity Statement will ask you for details of total acquisitions, whether or not GST is applicable. So go to your accounts and extract the figures for the last 3 months for:

Acquisitions where GST has been charged

Acquisitions which were GST free

Acquisitions which were used to make Input Taxed Supplies

So, you tell the government about all the GST you have paid on your purchases, whether or not you will be allowed to deduct it from the GST you will have to pay on your sales.

First, add up the amounts that can be offset against your GST liability - you can get these amounts from the receipts you got from your suppliers

Capital Expenditure (Balance Sheet assets)

The amounts of GST that will hurt the most will be those payable on the more expensive acquisitions you make such as:

Plant and equipment

Motor vehicles

Land and buildings

Other expenditure of a capital nature

Amounts exceeding $300 for items you will be depreciating

These are the items that will end up in your balance sheet, rather than your income statement when you come to do the accounts at the end of the year. In fact these are the first items you will enter as a total into the Business Activity Statement.

Expenses you deduct from Revenue (Income Statement expenses)

So much for the cost of assets, but you will also have expenses to claim against revenue such as:

Stock

Ongoing business expenses

Office expenses

Legal expenses

Now add up these amounts and enter the total!

(They will be the credit you get for the GST you have paid which you can offset against the GST on your sales)

But there will be some GST amounts you have paid which you will NOT be allowed to offset against the GST on your sales!

Add up the amounts that can NOT be offset against your GST liability - these will be the amounts on which NO GST was payable.

Input Taxed sales and income and other supplies such as

Financial supplies

Residential rents

Precious metals

Long term accommodation

Acquisitions with no GST in the price

GST free acquisitions

Acquisitions from suppliers that are not registered for GST

The private use of Acquisitions (This could be the private proportion of motor vehicle expenses which is used for claiming an income tax deduction. This can not be offset against GST payable)

Amounts which are not deductible for income tax

fines

relatives travel expenses

recreational club expenses

entertainment expenses

uniforms

Add up all your GST free acquisitions then deduct them from the gross amount of acquisitions

Is that it?

Not quite!

Time to fix up any mistakes in previous Business Activity Statements.

Add together all the adjustments you need to make to previous statements

These could be:

Adjustment events such as discounts on purchases eg paid $10,000 in previous period, but $100 vendor discount received in this period for payment with 30 days of sale

Bad debts written off or recovered

Change in creditable purposes such as private proportion on motor vehicle expenses changed from 50% to 40% due to change in usage pattern

Adjustments arising from company amalgamations

Adjustments for input taxed supplies

Adjustment for supplies of going concerns

Ceasing registration

Add adjustments to the total on which GST is payable (it might be a negative figure)

Done that?

Now divide the total by 11.

(that will give you 10% of sales or the GST you must pay)