Business Activity Statement
GST Reporting Methods
Calculating GST Owed
Calculating GST Input Tax Credits
Preparing the GST Return
Taxation Office Tips
Due Date for Lodgement
How to Make a Payment or Receive a Refund
Lodging the GST Return
GST Corrections and Adjustments
Business Activity Statement
The GST return is part of the Business Activity Statement. The Statement covers the remittance of a number of different taxes, including GST, fringe benefits tax and PAYG withholding. Parts of the Business Activity Statement may need to be completed monthly, for example if the church is remitting PAYG withholding monthly. The GST section will be completed either monthly or quarterly in accordance with the church’s GST registration nomination.
The Business Activity Statement may require disclosure of a number of amounts in relation to sales, purchases and GST. The required disclosures depend on which method is used for completing the Business Activity Statement.
GST Reporting Methods
The different GST reporting methods permitted under the GST Act are as follows:
Option 1: Calculate GST and Report Quarterly
This method is called Option 1 on the Business Activity Statement. Under this method, you are required to disclose the following:
Total Sales (G1) – This includes sales subject to GST, GST-free sales and input taxed sales. However, it excludes tithing, donations, non-profit sub-entities transactions and transactions between members of your religious group. It includes general sales, interest income and fundraising events treated as input taxed. G1 must always be completed. If the amount is nil, write 0.
Export Sales (G2) – Generally not applicable but some churches may supply goods or services to overseas entities.
Other GST-free sales (G3) – This includes sales that are GST-free such as religious services and non-commercial GST-free categories. However, GST-free exports are excluded under G3 as it is already disclosed under G2.
Capital Purchases (G10) – Generally this is for capital items costing more than $1,000.
Non-capital Purchases (G11) – Most other supplies, but excluding government charges, such as BADT, stamp duty, salaries and superannuation.
The actual GST collected (1A) and GST paid (1B) should be recorded on the summary section on the back of the BAS. 1A must always be completed. If the amount is nil, write 0.
G1 and 1A must be completed. Any other box on the BAS for which the amount is nil should be left blank.
In completing these disclosure items, you may use either the accounts method or the calculation sheet method. Under the accounts method, the items are generally taken from your accounts. They can be GST inclusive or exclusive and reasonable estimates can be used.
Under the calculation sheet method, you should complete the GST calculation worksheet provided with the BAS instructions. This worksheet is not lodged with the Taxation Office, but should be maintained with your records.
The accounts method can only be used if the church’s record keeping and accounting systems can accurately provide details of GST payable and input tax credit entitlements. Both manual and computerised accounting systems are capable of meeting these requirements, but they must be accurately maintained.
Option 2: Calculate GST Quarterly and Report Annually
Under this method total sales should be recorded at G1. This number can be GST inclusive or exclusive. The actual GST collected (1A) and GST paid (1B) should be recorded on the summary section on the back of the BAS. G1 and 1A must always be completed. If either amount is nil, write 0. Any other box for which the amount is nil should be left blank.
You must also complete an annual reconciliation statement, known as the Annual GST information report. The due date for the report is 28 February after the end of the financial year. This report will require you to show annual amounts for exports (G2), other GST-free sales (G3), capital purchases (G10) and non-capital purchases (G11). In effect, you will ultimately disclose the same information as required under the “Calculate GST” method, but on an annual basis rather than quarterly.
Option 3: ATO Provided GST Instalment Amount
Entities with a GST turnover of less than $2 million and who remit GST quarterly have an additional option, option 3. An entity must have completed two quarters of GST remittances before this method is available to the entity.
Under this option entities simply pay a GST quarterly instalment amount provided by the Taxation Office shown at G21 on the BAS. The quarterly GST instalment is equal to one-quarter of the previous year’s total GST remittances, increased by a GDP factor. To use this method, entities need to tick the box next to option 3 and transfer the amount shown at G21 to 1A.
Under this method, the entity is required to complete an annual GST return showing actual annual sales, exports, other GST free sales, capital purchases, other purchases and actual GST payable. The actual GST liability is then compared to the total instalment paid for the year. If the total GST instalment paid for the year is greater than the actual GST liability, the entity will receive a refund for the difference. If the total GST instalment paid is lesser than the actual GST liability, the difference will be payable.
This option is not available to entities that is in a net refund position (i.e. GST refunds is greater than GST paid). This net position for an entity that is registered for more than 12 months, takes account BASs lodged in the previous 12 months. For entities that are registered for less than 12 months, the net position is based on all the previous BASs lodged excluding the first BAS.
Supplies made by churches are generally not subject to GST. As such, it is common for churches to be in a net refund position. Therefore, option 3 is generally not available to churches.
GST Annual Reporting
Churches that have voluntarily registered for GST can report and pay GST on an annual basis. Churches with a turnover of less than $150,000 can choose whether or not they register for GST. As turnover does not include donations, tithes and offering, very few churches have a turnover in excess of $150,000. Therefore most churches that are registered for GST have done so voluntarily.
Most churches receive GST refunds rather than pay GST and therefore annual reporting is unlikely to be available.
Which Method to Use
Few churches can use option 3, the “GST Instalment Amount” or GST annual reporting. Therefore the choice is usually between option 1, “Calculate GST and Report Quarterly”, and option 2, “Calculate GST Quarterly and Report Annually”.
Generally it is preferable to use option 1. This method requires you to reconcile your GST liability quarterly, particularly if the calculation sheet method is used. Therefore option 1 is likely to produce less errors than option 2 which only requires an annual reconciliation. Under option 2 you may make the same mistake several times before it is detected in your annual reconciliation. Penalties can be imposed for incorrect BASs and for underpayment of tax.
Option 2 is more cumbersome than option 1 in that you will still be required to lodge four quarterly BASs plus an annual GST Report. The only advantage of option 2 is that it is easier to prepare the BAS within the 28 day period allowed. However, ultimately it requires disclosure of the same information, just annually rather than quarterly. Therefore there is little reduction in paperwork, just a change in the timing of it. Using option 1 also overcomes the problems that can occur if there is a change in Church Treasurer during the year.
Whichever method is used, churches will still need to ensure they keep accurate records. They will need to distinguish between taxable supplies and GST free supplies and between purchases with or without GST. We recommend that churches continue to review and reconcile their GST records each quarter.
A church can elect to remit GST returns either monthly or quarterly. These methods are discussed in detail in Monthly or Quarterly GST Returns. For churches with turnover of less than $150,000, there is also an option to lodge GST return on an annual basis.
Calculating GST Owed
The amount of GST owed for any period depends on whether the church has elected to remit GST using the cash or accruals method. It is likely that most churches will elect to use the cash method as it is simpler to administer.
It is important to note that the GST collected during the provision of goods and services may not equate to the GST payable. Where the church has failed to charge the required GST on a transaction, it must remit 1/11th of the price charged.
Under this method the amount of GST owed is the amount of GST actually received. If consideration for the sale of a good or service is being received in instalments, the GST need only be remitted in instalments.
This method is relatively straightforward. Provided accurate accounting records are maintained, the GST owed should be easily calculated. If a manual system is used, the amount owed is the sum of the amounts recorded in the “GST Collected” column of the cashbook.
Under this method, GST is owed at the earlier of:
- An invoice is raised; or
- Any part of the consideration is received.
For most church sales, the invoice would be raised at the time the consideration is received. However, if the church provides credit or payment terms, GST may need to be remitted to the Taxation Office before the cash has been received. If consideration for the sale of a good or service is being received in instalments, the whole of the GST amount will usually need to be remitted to the Taxation Office in the first GST period.
It is not recommended that the accruals method be used if a manual accounting system is in place. A computerised accounting system being run on the accruals system will be able to easily generate the amount required to be included in the GST return. However, the system will need to be set up to record debtors and creditors.
Calculating GST Input Tax Credits
The amount that can be claimed depends on whether the church is using the cash or accruals method.
GST credits cannot be claimed from the Taxation Office until the GST has been paid. If payment is made in instalments, the GST must be claimed in instalments.
A well maintained accounting system, whether manual or computerised, should be able to easily generate the amount to claim.
GST can be claimed at the earlier of:
- The time an invoice is received; or
- Any consideration is paid.
Where a purchase is made in cash, the GST can be claimed from that time.
However, many churches buy goods and services on account, usually allowing 30 days for payment. Under the accruals method, the GST claim relates to the period in which the purchase is made and invoice received, rather than the period in which payment is made. Therefore, it is possible for the church to claim the GST credit from the Taxation Office before it has to pay the tax to the supplier.
A computerised accounting system that records creditors will allow GST to be calculated under the accruals method.
Regardless of cash or accruals method, a tax invoice need to be held at the time an input tax credit is claimed. A tax invoice is not necessarily the same with an invoice. For an invoice to be a valid tax invoice, it must be of a prescribed form.
A claim can only be made for GST paid if the church holds a tax invoice. A tax invoice is not required for purchases of less than $75 GST exclusive. A tax invoice is also not required if the supply is not subject to GST such as an input taxed or GST-free supply as there is no entitlement to claim input tax credits on the supply.
Before making a claim for GST, the church should ensure that it holds all the required tax invoices and adjustment notes. These records must be maintained for at least 5 years.
Tax invoices are discussed in more detail in Tax Invoices.
Preparing the Business Activity Statement
Before Starting the BAS
1. Read the Tax Office guide on the completion of a BAS.
2. Understand your structure. Before commencing your BAS it is important that you clearly understand your entity’s structure for GST purposes (ie Group, Branch, Non-Profit Sub-Entity) and that this is clearly documented. This will allow you to determine the scope of the transactions covered by your BAS.
3. Determine wether you are accounting for GST on a cash or accruals method. This will determine which transactions to be included in that period’s BAS.
4. Determine which GST reporting method is being used, eg complete the BAS using either the calculations sheet method or the accounts method, or alternatively use one of the other options and complete an annual reconciliation statement.
5. Review all your transactions. You should undertake a review of transactions processed during the period and ensure:
a) the GST collected or paid has been allocated to a balance sheet
account rather than the income and expenditure account;
b) any income transactions that have been treated as GST-free have
appropriate documentation detailing reasons for such classification; and
c) you hold the required tax invoices.
The following issues should be taken into consideration when preparing your first BAS.
GST Inclusive Values
When completing the BAS, you should use GST inclusive amounts if using the calculation sheet method. For account method, you may use either GST inclusive values or GST exclusive values, but you must disclose which method is being applied. Only include GST in total sales amount if you have tick the box ‘GST inclusive’.
Most computer software packages are able to generate GST reports showing the net and gross amount of GST transactions. If you are using a manual accounting system, it may be easier to use GST exclusive amounts.
The BAS uses gross (ie GST inclusive), whole dollar values. Instead of rounding values up or down to the nearest dollar, the cents should simply be left off. For example, $50.21 and $50.89 will simply become $50.
This means that for churches using computer software packages for the recording of their GST transactions, there will be some rounding differences between the GST payable/receivable calculated and the GST payable/receivable actually paid. These rounding figures can remain in the GST liability account in the balance sheet, or can be transferred to a separate rounding account.
Boxes that must be Completed
1A must always be completed. If using option1 or option 2, G1 and 1B (if applicable) must be completed. If either amount is nil, write 0. Any other box on the BAS for which the amount is nil should be left blank.
Capital acquisitions for the period are recorded at G10. Technically there is no set dollar amount at which an item is considered to be ‘capital’ but rather an acquisition is considered to be ‘capital’ on the basis that the acquisition has a useful life of greater than one year. Whether an item is a capital purchase is not dependent on its purchase price. Examples include: motor vehicles, computers, furniture, calculators, telephones, and fax machines etc. Non-capital acquisitions would include trading stocks, lease payments, running expenses such as stationery, repair and maintenance.
However, the Taxation Office has stated that if the entity’s turnover is less than $1,000,000, only capital items in excess of $1,000 need to be recorded at G10. Capital items of $1,000 or less can be recorded at G11. The turnover of most churches will be less than $1,000,000 and these rules will apply.
- Donations or offerings received are not required to be shown on the BAS as there is no supply.
- Transactions between members of a GST religious group are not required to be shown on the BAS. Note that if the church was charged GST by the denomination before the religious group was formed, then the transactions between the church and the denomination that included GST should be reported on the BAS.
- Transactions of non-profit sub-entities should be excluded from the BAS;
- Salaries and wages are not required to be reported in the GST section of the BAS. Salaries and wages will, however, be shown at W1.
- Superannuation paid on behalf of employees is not required to be shown on the BAS.
- Interest Income goes into G1 and G4 (ie the net GST effect is nil).
- Dividends and trust distributions received are not shown on the BAS.
- Government charges do not go on the BAS. This includes BADT, stamp duty and council rates.
- Amounts reimbursed to employees, agents or other officers for acquisitions they made for the church are shown at G11. The required tax invoices must be held to be able to claim input tax credits
The BAS is also used to remit PAYG withholding. Most churches are only required to remit PAYG withholding quarterly. However, larger churches may need to remit monthly or even weekly.
All gross salaries and wages and other payments are required to be shown at W1, while the tax withheld is required to be shown at W2. Amount withheld where ABN is not quoted is shown at W3. All other tax withheld is shown at W4. W4 is rarely applicable to churches. Total amount withheld shown at W5 is taken into account in working out the overall tax liability for the quarter.
Checking the BAS
It is important that a thorough review of the BAS is made prior to lodgement. Double check that the GST collected and payable at 1A and 1B agree to the GST the church has actually collected or paid. It is important that these figures are correct. The other boxes are purely disclosure items that do not affect your GST liability.
Taxation Office Tips
As a result of various audit activities, the Taxation Office has released a factsheet covering areas where the Taxation Office found that mistakes were commonly made. Churches should be aware that the Taxation Office does audit churches and that the audits tend to be extensive and thorough. Accordingly, churches should be regularly reviewing their GST procedures to ensure that errors are not occurring.
The Taxation Office found that many smaller organisations have poor GST record keeping. As a result, the amount at G1 (total sales) and the actual GST liability is often incorrect.
Cash transactions were often omitted from an organisation’s records and therefore were not recorded on the BAS. For a church, the issue is less crucial as cash transactions rarely relate to taxable supplies. However, it is still important that churches instigate proper recording systems for cash transactions, including petty cash.
Cash and Accruals
Taxation Office auditors frequently found that organisations have registered for GST for one method, but are preparing their BAS using the alternate method. For example, an organisation is registered on an accruals basis, but is remitting and claiming GST on a cash basis. Each church should ensure that its GST registration is correct.
Claiming Input Tax Credits
Organisations claimed input tax credits where the supplier was not registered for GST. It is recommended that where you are unsure whether a supplier is registered, you should check their GST registration. Registrations can be viewed at www.abr.business.gov.au. This website can also be used to check the Australian Business Number.
A tax invoice is not required where the GST exclusive amount is less than $75. However, it is still important to consider whether the supply does include GST. For example, the purchase of milk for the office will cost less than $75, but no GST should be claimed as milk is GST-free.
It may be necessary to apportion expenses between general church operations and input taxed transactions, such as residential rents, non-profit sub-entities and input taxed fundraising events.
Sale of Capital Assets
The GST rules apply to all supplies and less common supplies are often forgotten. Many organisations failed to consider the GST implications of one-off transactions, such as the sale of capital assets including buildings and equipment.
The sale of second hand equipment, such as computers and photocopiers, can give rise to a GST liability. However, churches should remember that they may be able to access the non-commercial supply rules. Where a church sells an item for less than 75% of its cost, the supply is GST free and there is no need to remit 1/11th of the sale proceeds. Again, this consideration and assessment should be documented.
The Taxation Office scans a paper BAS when it is received. If the document does not scan properly, the computer will not process the document. It needs to be processed manually by Taxation Office staff. Due to a backlog at the Taxation Office, it may be many months before this occurs. If the church is due a refund, there may be a significant delay before it is received.
To avoid scanning errors:
- Do not lodge photocopied BAS
- Use a black pen, not a blue pen, to complete the form
- Complete all sub-totals, including items 3 and 9
- Do not use the following symbols: $, +,0 , -, N/A, etc. If an amount is nil, leave the box blank (except for G1, 1A and 1B where it is nil you will need to fill in 0)
- Use whole dollars only. Do not enter cents.
- Check all additions and subtractions before mailing the form.
Nothing to Report
Unless the Taxation Office advises that no lodgement is required, you must complete and lodge your BAS by the due date shown on the statement even if you have nothing to report. You will need to enter ‘0’ in G1, 1A and 1B.
Due Date for Lodgement
Churches can elect whether to remit GST monthly or quarterly. The merits of each method are discussed in Monthly or Quarterly GST Returns.
The due date for lodgement for monthly GST remitters is 21 days after the end of the period.
For quarterly GST remitters, the due dates are as follows:
Quarter Due Date
Quarter 1 (July – September) – 28 October
Quarter 2 (October – December) – 28 February
Quarter 3 (January – March) – 28 April
Quarter 4 (April – June) – 28 July
You may be able to obtain a two week extension for quarters 1, 3 and 4 by lodging electronically.
A church may still be required to lodge an Activity Statement (BAS) monthly even if remitting GST quarterly. An Instalment Activity Statement is used to remit other taxes where no GST remittance is required.
For example, many churches will remit their PAYG withholding monthly. If the month is not a GST quarter end, the church will receive an Instalment Activity Statement. The due date for a Activity Statement with no GST reporting is 21 days after the end of the month.
Example – A church remits PAYG withholding for employees totalling more than $25,000 per annum. Therefore, it is required to remit group tax monthly. However, it has elected to remit GST quarterly. It also pays fringe benefits tax quarterly.
An Instalment Activity Statement will be lodged by 21 August and will show PAYG withholding only. Similarly an Instalment Activity Statement showing PAYG withholding only will be lodged by 21 September. A Business Activity Statement showing PAYG withholding, GST and FBT must be lodged by 28 October.
If the due date is not a business day, the due date is deferred to the next business day. A business day is a day other than Saturday, Sunday or a public holiday for the whole of any State or Territory. Therefore if the due date falls on a public holiday for any State the whole of Australia receives the extension, not just the State that has the holiday.
Note that lodgement of the BAS and payment of the tax occur when they are received by the Taxation Office, not when they are posted. BPAY payments usually take one working day before they are received by the Taxation Office.
If the amount of GST owed exceeds the amount of GST that can be claimed, the church must remit the difference to the Taxation Office. The amount must be paid by the due date for lodgement of the return.
If the amount of GST owed is less than the amount of GST that can be claimed, the Taxation Office will owe the difference to the church. The Taxation Office must refund the amount within 14 days of the date the GST return is lodged or interest will be paid.
However, the GST amount is part of the Business Activity Statement. In effect, all taxes shown on the Statement are totalled and only one payment is made to or from the Taxation Office. If the GST is a net refund, the refund will firstly be applied to other taxes owed on the Statement. Only if the sum of all taxes is negative will the church receive a refund.
As most churches will be remitting PAYG withholding, a net refund is only likely to occur if substantial purchases have been made during the period, eg large capital items or property.
How to Make a Payment or Receive a Refund
If the Business Activity Statement shows an amount due to the Taxation Office, payment can be made:
1. At any post office;
2. By mailing a cheque to the Taxation Office using the pre-addressed envelope provided; or
Cheques should be made out to the ‘Deputy Commissioner of Taxation’ and crossed ‘Not negotiable’.
If a refund is due on the Business Activity Statement, the refund will only be made electronically. No cheque will be issued for BAS refunds. The nominated bank account must have previously been provided to the Taxation Office. It is important to update the Taxation Office of any changes to nominated bank accounts or else you might not receive a refund.
Lodging the Business Activity Statement
The Business Activity Statement can be lodged electronically or manually. Manual lodgement would involve completing a paper return and mailing it to the Taxation Office.
Lodging electronically will be advantageous where a refund is due as it is expected that electronic lodgements will result in faster refunds. You may also be able to obtain a two week extension for some lodgements by lodging electronically. The Business Activity Statement can be lodged electronically through the Taxation Office website.
GST Corrections and Adjustments
If a refund is made in respect of a good or service, or there is a change to the price of the item, there will need to be an adjustment made to the GST owed or GST claim. If the price of the good or service is more than $82.50 (GST inclusive), an adjustment note must be issued (see Tax Invoices).
The accounting for the GST for such an adjustment is made in the period in which the adjustment occurs. For more information on adjustments see Adjustments for GST previously claimed.
Example – A church buys and pays for a book in September 2019 for $110. It claims the GST credit of $10 in its September GST return. In October 2019, it returns the book to a supplier for a full refund of the $110 paid. The church must include $10 as GST owed in its next GST return. No amendment is made to the September GST return.
Bad debts will not be a GST issue for a church unless the church is remitting GST using the accruals method. If this method is being used, the church can make the GST adjustment at the time the bad debt is written off in the books of account or twelve months, whichever is earlier. If a GST adjustment is made and the bad debt is subsequently recovered, a further adjustment is required.
Correcting GST Mistakes
Errors are different from adjustment events. An adjustment event is as a result of changes in circumstances such as changes in use, changes in consideration paid, etc. Errors on the other hand are mistakes made when completing a BAS such as clerical errors, claiming GST credits without a tax invoice, incorrectly treating a GST-free supply as taxable supply.
Unlike an adjustment event where it is taken up in the current period BAS, an error requires the revision of the original BAS where the error was made unless it falls within certain limitations. Rather than revising the original BAS, the Taxation Office has given concession to take up the correction in current BAS if:
- it was a genuine mistake; and
- the error falls within the limits as discussed below.
For correction of errors that will increase GST payable (or decrease GST refunds), both time limits and correction limits apply.
For correction of errors that will decreasing GST payable (or increase GST refunds) only correction limits apply.
However, input tax credits for which a tax invoice is held and you are entitled to claim in an earlier BAS but which for some reasons you did not claim is not considered to be a mistake. Therefore, no time or correction limits apply. You can simply claim the credits in any subsequent BASs. The Government is now considering putting a four year time limit to claiming input tax credits that were not previously claimed. At the time of writing, this change has not yet been legislated.
GST may have been collected but not remitted in the relevant period. For example, the church runs a chocolate drive. The money, including the GST, is collected by the members. However, it takes the church some months to obtain all the funds from the church members. The GST liability arises at the time the church becomes aware of the amount collected which is usually when the money is received by the church and not at the time the members collected the money.
The correction and time limits are as follows:
Correction Limit Per BAS
|Less than $20m
|Up to 18 months (18 monthly BASs, 6 quarterly BASs or 1 annual GST return)
|Less than $5,000
|$20m to less than $100m
|Up to 3 months (3 monthly BASs)
|Less than $10,000
|$100m to less than $500m
|Up to 3 months (3 monthly BASs)
|Less than $25,000
|$500m to less than $1b
|Up to 3 months (3 monthly BASs)
|Less than $50,000
|$1b and over
|Up to 3 months (3 monthly BASs)
|Less than $300,00
Nearly all churches have a turnover of less than $20 million and therefore their correction limit will be less than $5,000 and will have up to 18 months to make the correction in current BAS. There will be no penalties or general interest charges if correction is made within the time and correction limits.
If the correction amount or time limit is exceeded, the organisation will need to revise the relevant BAS. Revision of an earlier BAS may result in penalties and general interest charges for any underpayment of GST.
Note that the correction limit applies to the net effect of correcting all mistakes. For example, input tax credits of $800 were over claimed, but GST included in taxable supplies was overstated by $600. The net effect is an increased GST liability of $200.
Example – The church has a turnover of less than $20m and reports GST on a quarterly basis. It has traded in an old motor vehicle in December 2017 for $11,000. It realised it has calculated cost of MV incorrectly when applying the GST-free non commercial activities exemption. As a result the church has treated the supply as GST-free and did not remit GST to the Taxation Office.
Further in the March 2018 quarter, due to clerical error the Church has also double counted the purchase of a laptop of $2,200. It has claimed input tax credits on the purchase twice (i.e. over claimed input tax credit by $200).
The church discover both these errors when preparing its June 2019 BAS. The first error in December 2017 BAS involves increasing GST payable, it will need to meet the time limit and correction limit criteria for the correction to be taken up in current BAS rather than revising the original BAS. The second error in March 2018 BAS only requires to satisfy the correction limit as it it is an error that involves decreasing GST payable.
The last period to correct the December 2017 mistake would be the June 2019 quarter BAS. The net effect of all total errors occurring in earlier BASs is equals $800 (i.e. $1000-$2000) and therefore within the correction limit of $5,000. As such there is no need to revise earlier BASs. Both the corrections can be adjusted in the June 2019 BAS.
If however the errors were only discovered in September 2019 quarter. The time would have run out to correct the error made in the December 2017 BAS. Therefore, the church would have been required to revise the December 2017 BAS instead. However, the error in the March 2018 BAS can still be corrected in the September 2019 BAS.
How to make corrections
The correction is made by simply adjusting the appropriate box on the GST section of the BAS.
If you are using the accounts method, you adjust boxes 1A and 1B. You also adjust boxes G1, G2, G3, G10 or G11 as appropriate.
If you are using the calculation sheet method, you adjust the GST inclusive amount of the correction at the appropriate box on the worksheet.
If you choose to use the simple remittance form method, adjustments are made to boxes 1A, 1B and G1 as required.
Do not include correction in the adjustment boxes of G7 and G18 on the worksheet as a correction is different from an adjustment.
How to revise earlier BAS
If you cannot make the correction on the next BAS, you will need to revise the relevant earlier BAS. You can request a new BAS from the Taxation Office. Alternatively, you can make the change online through the Taxation Office’s business portal.
Your entitlement to an input tax credit ceases four years from the due date of the earliest BAS you could have claimed it, ignoring any requirement to hold a tax invoice.
Example – A church is registered for GST on a cash basis and reports GST on a quarterly basis. The church purchased a computer for $2,200 (inclusive of GST) in December 2015 and only paid for the computer in January 2016. The input tax credit of $200 is claimable in the quarter ended 31 March 2016. The due date of the BAS is 28 April 2016. The four year time limit for claiming the input tax credit ends on 28 April 2020.
GST Included in Non-taxable Supplies
Many supplies by a church will be GST-free as they are religious services or they are non-commercial supplies. Non-commercial supplies exist where the consideration for the supply is less than 50% of market value or 75% of cost.
However, a church will occasionally incorrectly include GST in a supply that is GST-free and remit that GST to the Taxation Office. The GST Act states that the Taxation Office must refund the GST provided that:
- The church has reimbursed the recipient for the GST incorrectly charged; and
- The recipient is neither registered nor required to registered for GST.
If both these conditions are not met, the Taxation Office has the discretion to still remit the GST. The Taxation Office has issued a Practice Statement in which it details when it will exercise its discretion.
If the supplier has remitted the GST and the recipient has claimed an input tax credit, then the Taxation Office is prepared to let the transaction stand. There is no need for either party to amend their prior Business Activity Statements. This is provided the supplier has not reimbursed the recipient for the GST incorrectly charged and the net financial result to the Taxation Office is GST neutral.
In all other circumstances, the supplier will need to seek a refund from the Taxation Office of the GST incorrectly charged and remitted. No refund can be claimed until the supplier has repaid the GST amount to the recipient.
The refund can be obtained by amending the previous BAS or, subject to correction limits, by claiming the refund on the next BAS.