The hack's guide to claiming GST credits

Jan Vykydal

Australia does a lot to help businesses, but although small business owners have been able to adapt to the GST regime (particularly by using accounting software and computer systems that make keeping track of everything easier), mistakes do happen. Many of these mistakes relate to over claiming of GST credits, which can be very costly for companies. Brisbane-based BM Bookkeeping Essentials notes that in 2007, the Taxation Office contacted 1864 GTS-generating taxpayers, and managed to raise 363 million dollars in GST liabilities. Here are some things you need to know about claiming GST credits.

Are you eligible?

Who has to register? The Australian Taxation Office says businesses may need to register if their GST turnover is more than 75,000 dollars per year (150,000 dollars per year for non-profits), if you are a taxi service, or if you want to claim fuel tax credits. Registering means you can claim tax credits, but it also means you have responsibilities such as including GST in the price of what you sell. You also need an Australian business number (ABN), but fortunately, you can apply for both at the same time. A short guide to when you can claim can be found here.

Before you make a claim

Before you claim your GST credits, make sure both you and your supplier are registered for GST, make sure your supplier has a valid ABN and make sure you have a valid tax invoice. You can check your supplier’s ABN using the Taxation Office’s ABN Lookup Tool or by using the ATO app. After that, be sure that no details are missing on the invoice, such as the date of issue.

Claiming a credit as soon as possible will help with cash flow.

Time limits

The Taxation Office has noticed that many businesses are trying to claim GST and fuel tax credits outside the time limit, and stresses that you have four years to claim a credit (although there are exceptions). Claiming a credit as soon as possible will help with cash flow.

Common mistakes

Taxpayers Australia says the ATO is being a little less strict than it has been in the past, but small businesses are still making a lot of mistakes. These include: claiming a credit without a valid invoice; wrongly claiming for GST-free purchases, such as basic food items; claiming GST credits on bank fees; wrongly claiming the full cost of an insurance policy; and even accidentally putting the right figures in the wrong field on a form.

Be extra careful if you’re in retail, rental, hiring and real estate services, and construction – the ATO found that most GST revisions come from those sectors.

Jan Vykydal

Jan is a Sydney-based writer and editor whose work has been published in a stable of titles including the National Post, The Daily Planet and Edmonton Examiner. He is currently Editor at ShortPress.