Purchases you should NOT include in your BAS!
Your business may make thousands of purchases within each BAS reporting cycle. However, this does not mean you simply write one eleventh of your total purchases on your Business Activity Statement. For a variety of reasons, some transactions are not included in “1B: GST on Purchases”. Here is a quick rundown on what you cannot include at this section of the BAS:
GST Free Products:
The legislation which enshrines the concept of GST specifically excludes certain products from needing to include GST in the sale price. Naturally, you cannot claim a GST credit on a product/service which is GST Free. Examples include basic food supplies and medical services. For more information, see the ATO’s Detailed Food List (https://www.ato.gov.au/Business/GST/In-detail/Your-industry/Food/Detailed-food-list/)
Bank fees and interest payments are also GST Free, and should not be included in your business’ BAS. Interestingly, credit card fees (merchant fees) can include a GST component if the product or service also carries GST.
Products from suppliers not registered for GST:
There are many businesses which operate below the minimum annual GST turnover threshold of $75,000. These businesses do not have to register for GST, so they therefore do not need include GST in the sale price of their goods/services. Even if the product normally carries GST, if the supplier is not registered for GST, the product does not carry a GST credit for you to claim. Effectively, products/services from these businesses are GST Free.
You are only able to claim GST on products/services which are connected to the “Indirect tax zone” (aka Australia). Other countries often have an equivalent to Australian GST; however, you are unable to claim the attached credits in an Australian Business Activity Statement.
Within the thousands of business purchases of your business, perhaps not all are for business use. For example, buying a Secret Santa present with the company card does not carry business use, and is private in nature. Any GST on a product or service which is unrelated to your business cannot be claimed within your business’ BAS.
Contact us at Dolman Bateman or Buildersbooks if you are looking for an experienced accountant or Bookkeeper.
This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice