For anyone who is commencing a business, it is important to understand the fundamentals of GST to ensure that any claims being made are legitimate and there are unlikely to be any unexpected surprises in the event of an audit or review.
This recent case with the AAT as reported by Smart Company shows how a lack of basic knowledge can result in significant adjustments to GST claims and penalties being charged. The worse thing about this case is that the taxpayer was not even aware that their claims for GST were incorrect when a simple meeting with their accountant prior to commencing business should have prevented any incorrect claims being made. The taxpayer is now in a position of having to repay significant amounts of GST back to the ATO in addition to penalties charged for recklessness.
A simple search of the ATO website provides some basic principles for claiming GST which every business owners should have some understanding of. The ATO website states
You can claim GST credits if all of the following apply:
- you intend to use your purchase solely or partly in carrying on your business and the purchase does not relate to making input taxed supplies
- the purchase price included GST
- you provide, or are liable to provide, payment for the item you purchased
- you have a tax invoice from your supplier.
The majority of transactions should be able to easily satisfy the above criteria, for anything that you are unsure of, you should consult your tax professional.