Is Your GST Compliance Up to Standard? ATO’s Focus Areas

Managing GST compliance might feel overwhelming but understanding your obligations can make the process more manageable. The ATO maintains its focus on ensuring businesses in Australia meet their GST obligations, with ongoing efforts to identify and address non-compliance. Non-compliance can lead to significant penalties, audits and reputational damage so staying informed and proactive is critical. This guide provides a detailed look at what the ATO targets and practical steps to effectively address GST errors.

What is GST?

The Goods and Services Tax (GST) is a consumption tax of 10% applied to most goods, services, and other transactions within Australia. Businesses registered for GST must include this tax in their prices, collect it on behalf of the ATO and periodically remit it via a Business Activity Statement (BAS). In return, they can claim credits for the GST paid on their business purchases, known as input tax credits.

GST is a requirement for businesses earning $75,000 or more annually ($150,000 for non-profits). Ride-sourcing providers and taxi drivers must register for GST regardless of turnover. If you’re unsure about your GST obligations, seeking professional advice is important.

ATO’s Key Focus Areas for GST Compliance

The ATO consistently monitors key areas where businesses often fall short, using advanced tools to address ongoing compliance challenges. Understanding these areas can help you avoid common pitfalls and stay on top of your GST obligations:

GST Registration and Income for Taxi, Limousine and Ride-Sourcing Services

• Ride-sourcing providers and taxi operators must register for GST from their first dollar of income.
• The ATO uses data-matching technologies to identify non-compliance in these industries.
• Example: A driver fails to register for GST and declare income earned through ride-sourcing apps. The ATO identifies this discrepancy using platform-provided data.

Omissions in Reporting

• Failing to report all taxable sales and purchases is a major red flag.
• The ATO uses advanced data-matching techniques to detect discrepancies.
• Example: A retail business fails to report cash sales, leading to underreported income and GST liabilities.

Incorrect GST Classification

• Misclassifying transactions as GST-free or taxable remains a widespread issue, especially in the property and construction sectors.
• Example: A restaurant incorrectly classifies takeaway food items as GST-free, resulting in underpaid GST.

Misreporting GST for Real Property

• The ATO is investigating GST misreporting for property transactions including incorrect use of the margin scheme and omission of GST on property sales.
• Example: A property owner incorrectly classifies a sale as GST-free, omitting the GST payable on the transaction.

Claiming Ineligible Input Tax Credits

• Claiming GST credits for purchases that are not eligible, such as private expenses or non-GST-registered suppliers, is a common error.
• Example: A company claims GST credits on personal expenses, such as a director’s private vehicle costs, which is not permissible.

Late or Missed Lodgements

• Consistently failing to lodge BAS on time can trigger audits. Prompt and accurate lodgement is essential to staying compliant.

How to Correct GST Errors

Mistakes can happen but the good news is that the ATO provides a clear framework for correcting GST errors. Addressing these errors proactively can help minimise penalties and maintain compliance.

1. Determine the Type of Error: A GST error must relate to an amount of GST, GST credit or GST adjustment. For example, overreporting or underreporting GST payable are common mistakes.
2. Use the Correct Process:

• For small errors within the correction thresholds, you can correct them in your next BAS.
• For larger errors, you may need to revise the original BAS or contact the ATO directly.

3. Meet the Time and Value Limits: Corrections must occur within the ATO’s specified time frames. For credit errors, this is typically within the 4 years of review. Debit errors have stricter time and value thresholds based on your GST turnover.
4. Keep Detailed Records: Document the nature of the error, how it was identified and the steps taken to correct it. This demonstrates good faith and compliance intentions in case of an audit.
5. Understand What’s Not a GST Error: For example, claiming a GST credit on a later BAS due to not having a tax invoice earlier is not considered a GST error. Similarly, adjustments due to price changes or returned goods should be handled differently.
6. Seek Professional Advice: GST errors can be complex. Consulting an experienced bookkeeper or accountant can ensure the correction is handled properly and reduce your risk of further issues.

Proactive Steps to Stay Compliant

Compliance is not just about correcting errors, it’s about preventing them in the first place.

Here are some tips to stay on top of your GST obligations:

• Implement Robust Systems: Use accounting software to automate GST calculations and reporting. This reduces the likelihood of manual errors.
• Regular Reviews: Conduct periodic reviews of your GST accounts to identify discrepancies early.
• Training and Awareness: Ensure your staff are well-informed about GST requirements, particularly if they handle invoicing or expense claims.
• Understand GST Adjustments: Adjustments for changing prices, returned goods or adjustments overlooked earlier must be handled carefully to avoid confusion.
• Professional Support: If you’re finding GST compliance challenging, consulting a bookkeeper can help simplify the process. These experts can provide valuable guidance on maintaining accurate records, understanding adjustments and ensuring compliance with ATO regulations.

Take Control of Your GST Compliance

The ATO’s focus on GST compliance is a timely reminder for businesses to review their processes and ensure they’re meeting their obligations. By understanding common areas of non-compliance and taking proactive measures to correct errors, you can avoid unnecessary penalties and keep your business on track.

At Carbon, we specialise in taking the stress out of GST compliance. Whether you’re dealing with errors, adjustments or need ongoing support, our team of experts is ready to help. Contact us today for tailored advice that keeps your business compliant and focused on growth.