GST: The Tax Man Cometh

The Australian Taxation Office received an extra $445 million in the 2010 Federal Budget. Why should that concern you? Because they are using those funds to attempt to recover more than $3 billion in lost GST revenue from Australian businesses.

Among other things, the ATO is targeting overdue Business Activity Statements, under-reporting of GST liabilities, non-payment of GST debts and fraudulent tax returns, with businesses large and small being firmly in their sights.

If your business is not GST compliant or your staff aren’t up to speed with GST requirements, now’s the time to do something about it. Some form of compliance training would be highly advisable, before the tax man comes knocking at your door.

According to the ATO, some of the most common mistakes made by businesses in relation to GST are:

• misinterpreting the GST legislation
• incorrectly claiming GST credits
• claiming them without valid tax invoices
• Not completing BAS reconciliations.

Businesses experienced in GST reporting are not immune either. They are more likely to commit errors when there are changes to accounting staff or accounting software, rapid growth or restructuring of the business, or when there is a failure in their accounting system,

GST problems are most often identified in the retail sector, construction industry, real estate and rentals and they can cost businesses dearly, with the ATO identifying more than 3 and a half million dollars in GST liabilities in the 2007-2008 tax year alone.

There’s no denying that GST is a complex subject, but knowing the areas where mistakes are most likely to be made can substantially reduce your risk of non-compliance as a business.

The ATO has said the focus of its crackdown is on:

• Timely BAS lodgement (reminders will be issued)
• GST refund claims (third parties will be contacted for verification)
• GST avoidance (data matching will be employed)
• Outstanding GST debts (penalties may be imposed for late payment).

Firstly, make sure you have accurate documentation and that you are observing sound accounting practices. Many errors also result from inadequate or non-existent internal controls.

When preparing BASs, double check that figures have been transposed correctly, particularly GST information.

Be sure that you are classifying supplies and acquisitions correctly and that GST credits claimed are only for those amounts subject to GST.

Educate your accounting staff on the latest rules and regulations relating to GST and as existing staff leave and new staff are hired, be sure they are also exposed to this information. Compliance training as part of a learning management system is an excellent way to ensure this happens.

The ATO crackdown on lost GST revenue will continue over the next few years. Although not stated, it would appear to be targeted more at small to medium enterprises (SMEs) rather than the higher end of town, so make sure your business is ready.

If you do discover errors in the course of reviewing your accounts, consider reporting them to the ATO now, before you are audited. It could save you a lot of money and headaches in the long run.