Do you have questions on what attracts GST and what does not? Every BAS quarter, we do a thorough review of our clients’ bookkeeping entries, to ensure we have accurately claimed GST correctly on all revenue and expenses. With laws changing frequently and in particular the introduction of the “Netflix” tax, it can be confusing as to what includes GST and what does not.
You probably know that basic grocery essentials such as milk, water, coffee, produce and meat are GST FREE. However, if you are buying these things for your business, you need to code them as GST FREE, not BAS Excluded or N-T.
Anything the ATO deems not essential, for example fast food, confectionary, chocolate and alcohol, does attract GST. You will often see on receipts from the supermarket which items have GST and which do not – a lot can be learned from those dockets!
However, with BAS around the corner, please find following a quick list of common GST coding errors we see across many small businesses, in particular for various add-on solutions and apps that you may be using in your business.
GST on Expenses
If you purchase a good or a service in Australia, GST will most likely be charged, unless you are purchasing an good or service that is exempt from GST.
- iTunes purchases
- Google Adwords
- Stripe fees
- GoDaddy (as of July 2017)
- Merchant Fees (bank)
- LinkedIn (as of Jan 2017)
- Dropbox (as of Jan 2018)
- Facebook Ads (as of Aug 2018)
- Contractors with an ABN and registered for GST (this should be on their invoice)
GST FREE Expenses
Purchases are coded GST Free either because they are bought from an overseas supplier (such as Facebook) or they are not registered for GST in Australia. This can change frequently (for example Dropbox only recently started charging GST so definitely keep your eyes open for changes – you’ll see in your invoices whether or not GST has been charged)
- Paypal Fees
- Contractors without an ABN or with an ABN but not registered for GST
- Most overseas transactions (eg. you buy a book online from the USA) Fines for parking, traffic violations
- Interest for late payments with the ATO
- Bank Fees
- International bank transactions
- Interest paid or received Gift cards
- Council rates, land tax and water/utilities rates (excluding inspections and investigations)
- ASIC fees
- Vehicle registration: the bulk of vehicle registration does not attract GST, however the premiums on CTP insurance do. It is best to check your registration papers for accuracy. Registration for trailers, however, does not attract GST as there is not CTP as part of the fee.
Clients often get confused between BAS excluded and GST Free. You need to ask yourself – is this a good or service? If yes, then GST or GST Free, If no, then BAS excluded. Following is a list of some of the most common BAS Excluded transactions:
- Personal transactions/drawings
- Loan repayments
- Transfers between accounts
- Wages and superannuation payments
- Payments/refunds to/from the ATO
With eBay, you’ll have to look carefully at your invoice to see if you have been charged GST on your purchases made, as it will depend on the registration status of the place you’re purchasing from. For example, if you buy a new computer from Harvey Norman’s eBay store, you will be charged GST on this purchase. If you buy a new phone charger from China, your purchase will most likely be GST Free. Have a look at the invoice if you’re uncertain. It is also best practice to attach your invoices to transactions if you’re using Xero, simply by dragging and dropping into the transaction.
Since the Netflix tax was introduced by the government in July 2017, eBay has introduced clause that businesses will be exempt from paying GST on their ebay fees, if they register their business and ABN with eBay. If you’ve done this, you will not pay GST on any of your eBay fees. If you haven’t registered your ABN with eBay, you will be paying GST on your fees.
As mentioned, these are subject to change – try to keep on top of the status of businesses and companies you commonly deal with, and we will update this blog as changes are made!
If you have any questions, please call us!! We’re always happy to help!