Ocean's Eleven? Try Australia's 70,000! (Well, not quite!)
You may have seen a few news articles in the past week about a Tax scam promoted on TikTok and Facebook that encouraged people to set up a fake business and claim GST credits on purchases that were never made.
Newsflash - do not attempt this! It's fraud, plain and simple.
Nevertheless, the viral scam has been attempted by approximately 70,000 people (who all risk jail time) and has led to over a billion dollars in attempted fraudulent refunds and at least a dozen raids by federal police and Tax officers. The ATO has also been working with social media platforms to remove content promoting the scam, and is urging participants in the scam to come forward with the understanding that some may have believed the scam was legitimate, and others may be recovering from the financial consequences brought about by COVID and natural disaster.
Given the massive potential dollar impact, it would be wise to expect more scrutiny of reported GST figures in upcoming business activity statement lodgements. To help ensure you're not in strife as 28 July and future deadlines approach, we've compiled a list of common GST pitfalls that businesses of all sizes often fall into when preparing their BAS.
- Tax codes - applying the wrong Tax code to an expense when it is added to a chart of accounts in your accounting system can lead to reporting errors that can go unnoticed for long periods of time. Be sure to consider which Tax code to apply to new expenses carefully.
- Financed purchases - it can be easy to double count GST claims when buying financed assets: once on the original purchase of the asset, and then again when making finance repayments. Be sure to understand which payments are made in respect of purchasing the asset itself (which GST can be claimed on) and which payments are made to discharge a financing liability (which GST cannot be claimed on).
- Unregistered suppliers - it can be easy to assume all of your business' suppliers are GST-registered. If any aren't, then GST credits can't be claimed in respect of those purchases, and you may also need to withhold payments made to those suppliers at the No ABN Withholding rate of 46.5%!
- Cash & accrual accounting - it can be easy to generate a 'BAS Summary' from your accounting software on an accrual basis at the click of a button. However, this report can lead to misstatements if your business is registered for GST on a cash basis! Be sure the basis of your GST workings matches the GST registration of your business.
- Private expenditure - while it can be tempting to claim GST on your down-south trips or your home renovations, business owners should be aware that GST cannot be claimed on purchases of a private nature. If you purchase an asset that is used both privately and for your business, GST can only be claimed on the asset's business use portion.
If you require assistance with BAS preparation or have any tough questions about GST, please feel free to contact your friendly Hall Chadwick adviser, who can link you with one of our resident GST experts.
Butler, Ben. 2022. 'Tax office and federal police conduct raids over billion-dollar Tax scam spread on TikTok and Facebook.' The Guardian, 17 June.
