GST and BAS in Australia

At My Simple Solutions, we make GST tracking straightforward by enabling you to categorise each business expense and invoice as GST or non-GST at the point of entry. This ensures accurate GST calculations and simplifies BAS preparation.

Key Features:

• Expense Categorisation: For every business expense, designate it as GST or non-GST. This ensures that only GST-inclusive expenses are counted for GST credits.

• Invoice Categorisation: Similarly, mark each invoice generated by your business with the correct GST status. This guarantees your GST collections are accurately tracked.

• Run Reports: Use the Run Report function to generate a financial report between two dates. This report displays your revenue, profit, GST Collected, GST Paid, and GST Owing, giving you a clear overview of your business’s GST position at any point.

• Real-Time Tracking: By updating the GST status of transactions as they occur, you maintain an up-to-date record, making BAS submission easier and more accurate.

By utilising these features, My Simple Solutions helps you streamline GST tracking, reduce errors, and stay compliant with Australian tax requirements.

GST (Goods and Services Tax) is a 10% tax applied to most goods and services sold in Australia. Businesses with annual turnover of $75,000 or more must register for GST. Businesses under this threshold can voluntarily register, which is often worthwhile if you make regular business purchases where you can claim GST credits. Businesses registered for GST must:

• Collect GST on sales to customers.

• Claim GST credits on business purchases.

• Pay the net difference to the ATO

The net difference between GST collected and GST paid is reported to the ATO, usually on a quarterly basis.

Example:
A mechanic charges $25,000 for services in a quarter, including GST. The GST portion (GST collected) is calculated as $25,000 ÷ 11 ≈ $2,273. If the mechanic spent $5,000 on materials including GST, the GST paid is $5,000 ÷ 11 ≈ $455. The net GST payable is $2,273 − $455 = $1,818.

When you purchase goods or services for your business and GST is included in the price, you can claim that GST back as a credit on your Business Activity Statement (BAS). This means you only end up paying GST on the value you add when selling your own products or services.

You can only claim GST credits on business purchases if:

• The supplier is registered for GST, and

• You have a valid tax invoice for purchases over $82.50 (including GST).

If the supplier is not registered for GST, you cannot claim GST back — even if you paid for the expense in full. The full amount is still deductible as a business expense, but no GST credit applies.

Example:

• A mechanic who is not registered for GST services your work vehicle and charges $220. The entire $220 is the cost of the service — there is no GST included, so no GST credit can be claimed.

• A GST-registered mechanic services your vehicle and charges $220. In this case, $20 is GST, and you can claim this amount as a GST credit if you hold a valid tax invoice.

A Business Activity Statement (BAS) is a form submitted to the ATO that reports your business’s tax obligations. It is primarily used for:

• GST reporting

• PAYG withholding (tax withheld from employees’ wages)

• PAYG instalments (prepaid tax on business income)

• Other taxes such as fuel tax credits or fringe benefits tax (FBT) installments

Most small businesses lodge BAS quarterly, though larger businesses may do so monthly. The BAS combines reporting and payment into one process, making it easier to manage your obligations.

1. GST on Sales and Purchases

   • Total sales (G1)

   • GST collected on sales (1A)

   • GST paid on purchases (1B)

   • Net GST payable or refundable (1C)

2. PAYG Withholding (if you have employees)

   • Total wages (W1)

   • Tax withheld (W2)

3. PAYG Instalments

   • Prepaid tax on your own business income (P)

4. Other Taxes

   • Any other obligations relevant to your business

Businesses are required to maintain the following records for a minimum of five years:

• Receipts and invoices for all business-related purchases

• Records of all sales transactions

• Bank statements

• Completed Business Activity Statements (BAS)

For any business purchase over $82.50 (including GST), you must obtain a valid tax invoice in order to claim GST credits.

A valid tax invoice must include:

• The words “Tax Invoice” (not just "Invoice") clearly displayed

• The supplier’s ABN (Australian Business Number)

• The date of issue

• The supplier’s identity (e.g. business name)

• A clear description of the goods or services supplied

• The amount of GST charged, or a statement that the total price includes GST

• The buyer’s identity (for invoices over $1,000)

To accurately claim GST credits, it’s important to keep track of business expenses as they occur, rather than waiting until the end of the reporting period.

It’s also important to keep track of whether each supplier is registered for GST, because only expenses from GST-registered suppliers can be claimed as GST credits. Recording this information as you go ensures your BAS is accurate and prevents missed credits or errors.

• Expenses from GST-registered suppliers:

  • Record the total amount paid and the GST portion separately.

  • Only the GST portion is claimable as a credit on your BAS.

  • Ensure you have a valid tax invoice for purchases over $82.50.

• Expenses from non-GST-registered suppliers or GST-free items:

  • Record the total expense for tax deduction purposes.

  • No GST credit can be claimed.

Best practice: Use a spreadsheet to categorize expenses by GST status as you pay them. This keeps your records accurate, ensures you don’t miss any GST credits, and makes completing your BAS simpler and more reliable.