GST - Common Errors

Dated: October 2006

The ATO has identified the following as being among the more common errors being detected in compliance audit activities:

Hire Purchase - when accounting for GST on a cash basis, GST inputs can only be claimed at the time of each repayment. The amount of the GST input allowed depends on the principal portion of each repayment.

Luxury Car Limit - you can only claim GST credits up to the luxury car tax limit (1/11th of $57,009).

Cancellation of GST Registration - entities who after acquiring an asset for which they were entitled to claim an input tax credit, subsequently cancel their GST registration, are required to include an increasing adjustment upon cancellation to repay the GST credits claimed.

Property Settlements - Rates Adjustments - where a GST registered vendor sells property which has adjustments for such matters as council and water rates, these adjustments may have to be added to or deducted from the settlement amount received from the purchaser.

Security Deposits - 'normal' deposits are being incorrectly treated as security deposits.

Restaurants and cafes - some restaurants are using inappropriate simplified accounting methods for their particular industry.

Deposits - Property Transactions - purchasers can claim a GST credit for the deposit for a creditable acquisition of land in the activity statement for the tax period in which settlement occurs (but a Tax Invoice is required).

Sale of Business Assets - the sale price of a business or any of its assets, including any GST must be included in the relevant BAS.