Written by Robert Lennox:
The end of September brings us to the end of the first quarter of the current financial year. Many of us will be preparing & lodging various activity statements. We wanted to take the opportunity to give everyone a reminder about some common mistakes that can be made when preparing business activity statements:
- Check what period you are reporting your income and expenses in – are you required to report on a cash or accruals basis? Cash Basis – report income when received and expenses when paid. Accruals Basis – report income when invoiced and expenses when incurred (rather than paid)
- Ensure you report items in the correct place in your activity statement – for example, report wages at label W1 (Gross Wages) NOT at label G10 (Capital Purchases) or label G11 (non-capital purchases). Wages are NOT an expense for activity statement purposes. Report the purchase of depreciable items at label G10 (Capital Purchases), not at label G11 (non-capital purchases)
- How do you report GST? Make sure you use the appropriate option for your GST period. If you report GST annually for example, you are only required to pay the GST instalment amount at label G21 each quarter and don’t need to fill in anything else. The information normally put at other labels is reported on your ANNUAL GST Return. If you report monthly, only include the GST, PAYG Withholding, Fuel Credits etc for THAT MONTH on the activity statement for the month. If you report quarterly, include the amounts for the WHOLE QUARTER.
- Ensure you are using the correct GST option for your business – you normally only get ONE chance in a financial year to set your GST options (usually in the first quarter of the financial year). Once you select one option for GST/PAYG reporting you will be stuck with that option for the rest of the financial year – choose wisely!!
- PAYG or GST Instalments – if these do happen to be incorrect on the activity statement they can be varied, but TREAD CAREFULLY. It is recommended that you contact us if you wish to vary your instalments. The other thing to be aware of is that if you intend to vary your instalments, the activity statement MUST be lodged by its ORIGINAL due date. Activity statements that are lodged late can cause intentions to vary instalments to quickly become unstuck.
- Special transactions – if you are a property developer and you elect to sell your property using the margin scheme, you need to be mindful of the requirements. Ensure that contracts are worded correctly and note that the GST is NOT simply an 11th of the sale proceeds. The full sale proceeds should be reported at label G1 and the GST on the MARGIN (sale price less purchase price divided by 11) should be reported at label 1B.
If you have any queries please contact the MGI Adelaide office.
This communication is general in nature and current as at the time of production. The information contained in this communication does not constitute advice and should not be relied upon as such. Should you wish to discuss any matter raised in this article, please feel free to contact us.