The Business Activity Statement (BAS) has been around now for 14 years. You would think that would be enough time for us all to get our heads around its various sections and labels. Unfortunately, many of us are still perplexed by the BAS and the Tax Office report that they still see many erroneous BAS returns as a result. I think one of the most confusing things about the BAS are its many labels. There are “G” labels, “T” labels, “W” labels and so on. What do they all mean? Do we have to use them all? What are they for? In today’s blog, I set out to explain what each BAS label means to hopefully clear up some of this confusion.
This is part 1 of a three-part blog. In part 1, I will cover all of the Goods and Services Tax labels (G labels). In part 2, I’ll review labels for PAYG Income Tax Instalments (T labels) and PAYG Tax Withheld (W labels). In the last part of this blog I will explain how to use BAS labels relating to fringe benefits tax (F labels), Luxury Car Tax, Wine Equalisation Tax and Fuel Tax Credits.
Goods and Services (GST)
Businesses registered for GST must report the amount of GST collected and paid to the Australian Taxation Office (ATO) each quarter, although some businesses report on a monthly or annual basis depending on their situation. Labels on the BAS used to report GST are all of the “G” labels and can be found on the front of the BAS.
G labels relating to your sales are labels G1 to G9 and labels used to report your purchases are labels G10 to G20. Note, you will not find all of the following G labels on the BAS itself. GST labels found on the BAS include: G1, G2, G3, G10, G11, G21, G22, G23, G24, 1A and 1B. The other G labels are found on the GST calculation worksheet which you should be using to assist you to work out the correct GST figures for your BAS. You can download a copy here. Okay, now let’s break down each “G” label see what each one means.
G1 to G9 – GST on Sales Labels
G1 – Total Sales
At G1, you are asked to report your total “gross” sales. Included in this figure are all sales which are GST-free, input-taxed and/or export sales. Here is a handy guide from the ATO explaining which items to include or not include at G1:
|Include items such as:|
- gross fees for services
- gross sales
- trade-ins and barter transactions
- the sale, lease or rental of land and buildings
- interest earned
- foreign income
- membership fees and subscriptions
- government grants and certain private sector grants
- the sale of business assets such as office equipment
- amounts recovered as a result of a lay-by sale being cancelled
- holding or security deposits forfeited by customers.
Don’t include items such as:
- private sales not related to your business
- salary and wages you receive
- hobby activities
- gifts and donations
- trust and partnership distributions you receive
- tax refunds
- government pensions, allowances and payments
- transfers between banks
- loans received
G2 – Export Sales
Here, you report the free on-board value (value used for Customs purposes) of exported goods. Export sales must meet the GST-free export rules to be classified as export sales. For more information about GST-free export rules, refer to GST – completing your activity statement (NAT 7392). You will also report payments for repairs of goods from overseas that will later be exported and payment for the goods used in those repairs.
G3 – Other GST-Free Sales
Other GST-free sales include most foods, health and education services, some childcare services, going concerns, religious services, water, sewerage and drainage services.
G4 – Input-Taxed Sales
The figure reported here include most financial supplies, rent or lease from residential premises and sales of residential premises (to be used for residential accommodation).
G5 – Sub Total
Here you simply add the results at labels G2, G3 and G4 together
G6 – Sales Subject to GST
Another simply math task – subtract G5 from G1
G7 – Adjustments
This is where you report any “increasing” adjustments. Increasing adjustments might include errors made on a previous BAS like sales you forgot to report, deposits or laybys forfeited by customers, a sale reported as GST-free that should have been reported as taxable etc. Basically, any error or event that causes the GST collected figure to increase, must be reported at G7.
G8 – Sub Total
Maths again! Add G6 to G7
G9 – GST on Sales
More maths – Divide G8 by 11
This resulting amount is transferred to 1A on the back of the BAS.
G10 to G20 – GST on Purchases Labels
G10 – Capital Purchases
This is where you report purchases of business assets like plant and equipment including machinery, cash registers, computers, furniture and motor vehicles. You would also report purchases of any land or buildings.
G11 – Non-Capital Purchases
Here you report most other purchases made for the running of your business and you can include such things as trading stock, office expenses like stationery and postage, repairs, equipment hire, leases, telephone, insurance etc. There is a good rule of thumb you can use to help you separate G10 and G11 amounts which can be used for businesses whose GST turnover is less the 1 million dollars (that’s most of us):
- you only need to record capital items costing more than $1,000 at G10
- capital and non-capital items costing $1,000 or less can be recorded at G11
G12 – Sub Total
More maths! Add G10 to G11
G13 – Purchases for making input-taxed sales
These purchases relate to the sales you made at G4 i.e. input-taxed sales. They include expenses for residential rent or lease and supply of financial services.
G14 – Purchase without GST in the price
This label asks you to report all GST-free purchases including purchases from overseas, donations, interest paid and other non-taxable importations.
G15 – Estimated purchases for private use or not income tax deductible
This where you report purchases that are more private in nature and/or are not tax deductible. These items include traffic fines, expenses for family members or events, some entertainment costs, travel not related to your business, recreational club expenses etc.
G16 – Sub total
Here simply add G13, G14 and G15 together
G17 – Total of purchases subject to GST
More maths! Subtract G16 from G12
G18 – Adjustments
As for G7, sales adjustments, here you report any error made or event that has resulted in a decreasing adjustment. A decreasing adjustment might come about if you find that in an earlier BAS you forgot to report taxable purchases made, a purchase reported as GST-free was later found to be taxable, clerical errors were made and purchases were not coded correctly at the time of data entry etc.
G19 – Sub total
Add G17 to G18
G20 – GST on purchases
Take the figure at G19 and divide it by 11. The resulting figure is transferred to 1B on the back of the BAS.
More “G” labels
G21 – Pay GST instalment amount
Known as “option 3” and found on the right hand side on the front of the BAS, this is an amount that the ATO works out for you to pay each quarter and is pre-printed on your BAS. It’s nice and simple because you don’t have to calculate anything – all you have to do is pay it! One thing to remember though if you opt for this arrangement is that you will have to lodge an annual GST return at the end of the financial year and report differences between your total GST instalments for the year and the actual GST liability.
G22 to G24 – Vary the GST instalment amount
If, for some reason you believe the amount at G21 is incorrect, you can vary the amount using labels G22 to G24. At label G24 you will be asked to enter a “reason code”. This code tells the ATO why you want to vary your amount. The reasons and associated codes include:
Variation reason codes
|21||Change in investments||Your investment strategy or policy has changed and this will significantly affect your annual tax liability. For example, the sale or purchase of investments such as shares or residential property, or the use of investments for private purposes.|
|22 *||Current business structure not continuing||Your current business has stopped trading or has changed its structure. For example, you have permanently closed or sold your business, it has stopped trading because of a merger or takeover, or it has gone into bankruptcy or liquidation or been placed in the hands of a receiver/manager.|
|23 *||Significant change in trading conditions||Abnormal transactions relating to your business income or expenses will significantly affect your annual tax liability. For example, you have bought or sold a major piece of machinery or your trading conditions have been affected by local or global competition.|
|24 *||Internal business restructure||You have restructured your business. For example, it has undergone an expansion or contraction, and this will significantly affect your annual tax liability.|
|25 *||Change in legislation or product mix||A change in legislation, or in the product mix of your business, will significantly change your annual tax liability.|
|26 *||Financial market changes||Your business has been affected by domestic or foreign financial market changes. This reason code is for businesses involved in financial market trading, including those whose income is affected by changes in financial products, for example, banks, finance and insurance businesses.|
|27||Use of income tax losses||You will be using income tax losses, including capital losses transferred from another entity, that will significantly affect your annual tax liability.|
|30||Change in fringe benefits for employees||You have changed your fringe benefits arrangements for employees. For example, you no longer provide fringe benefits, or you have reduced fringe benefits and increased salary.|
|31||Change in employees with fringe benefits||You have changed the number of employees receiving fringe benefits or there is an increase in employee contributions.|
|32||Fringe benefits rebate now claimed||You are now claiming the fringe benefits rebate.|
**taken from ATO webpage: http://bit.ly/1uvhent
If you want more information about varying your GST instalment amount, go to Varying your GST instalments (NAT 4239).
So that’s all of the GST BAS labels covered! I hope this has clarified some confusion you may have been experiencing previously when completing your BAS. In part 2 of this blog, I will showcase BAS labels used to report PAYG Withholding and PAYG Income Tax Instalments and in part 3, I’ll look at labels used for reporting Fringe Benefits Tax, Luxury Car Tax, Wine Equalisation Tax and Fuel Tax Credits. Until next week, happy reading!