XBert Type: Standard
Accounting Software: Xero, MYOB, QuickBooks Online
Country Restriction: Australia only
Risk Type: Tax Risk
Business Function: Purchases
Overview
This XBert checks your purchase bills for GST claimed on a cost that can never carry a GST credit. Some expenses simply have no GST in their price, so any GST recorded against them is a credit you are not entitled to. Claiming it overstates the GST credits on your activity statement. Catching it before you lodge your BAS lets you correct the amount now, rather than dealing with an ATO review or amendment later.
What it does
It reads the individual lines on each purchase bill and looks for any line that has a GST amount recorded against it. For each of those lines it checks the account the cost has been coded to. If the account is one where GST can never apply, such as wages, superannuation or bank fees, it treats the GST on that line as wrongly claimed. It adds up the wrongly claimed GST across the whole bill and reports it in dollars, so you can see exactly how much your GST credits have been overstated.
How it works
The XBert raises a flag when a bill has GST recorded against a line that is coded to a cost the ATO treats as having no GST credit. It only looks at a focused list of accounts where GST is essentially always wrong, so the flag is reliable. The categories it watches are:
Wages, salaries and superannuation, which are employment payments, not a purchase of goods or services.
Bank fees, account-keeping fees, interest, loan repayments and loan principal, which are financial supplies with no GST.
Government taxes, duties and charges, such as council rates, land tax, stamp duty, vehicle registration, licence fees and ASIC fees.
State payroll tax, which is a government tax outside the GST system.
Fines and penalties, which are not payment for a supply.
Dividends and drawings, which are distributions to owners, not a business cost.
It deliberately ignores lines that have no GST recorded against them, because nothing has been over-claimed there. It also stays focused on the clear-cut categories above and leaves out grey areas such as rent, food or your own GST-free supplies, where a flag could be a false alarm. To avoid chasing you over a few cents, it stays quiet unless the total wrongly claimed GST on the bill reaches a small materiality amount. In short, it only fires when a bill carries a genuine, material GST credit on a cost that cannot legally carry one.
Example/Use Case
Daniel enters the monthly bank charges for his business, a $330 line for merchant and account-keeping fees. By habit he picks the standard GST tax code, so $30 of GST is recorded against the line. Bank fees are a financial supply with no GST in the price, so that $30 is a credit the business is not entitled to. Left alone, it would quietly overstate the GST credits on the next BAS. XBert flags the bill, shows that GST has been claimed on a non-claimable cost, and reports the $30 over-claim. Daniel changes the line to a no-GST code so the GST drops to zero, and the BAS figure is right before he lodges.
Accounting software
This XBert runs on purchase bills from Xero, MYOB and QuickBooks Online.
Which countries it supports
This XBert applies to Australia only. It uses Australian GST rules and BAS labels, drawing on the ATO's guidance on when a GST credit cannot be claimed.
Processes
Business area: Purchases (accounts payable). To resolve a flagged bill:
Open the bill and find the flagged line or lines, where GST has been recorded against a non-claimable cost.
Confirm the account is genuinely one with no GST credit, such as wages, superannuation, bank fees, interest, a government charge, payroll tax, a fine, or a dividend or drawing.
Change the tax code on that line to a no-GST code, such as BAS Excluded, Input Taxed or GST Free as appropriate, so the GST amount becomes zero.
Check the original supplier document, as some bills mix a non-claimable charge with a genuine GST-bearing service fee, and only the service fee should keep its GST.
Look for the same coding on earlier bills from the same supplier, as recurring fees and wage runs often repeat the mistake, and correct those too.
If the bill falls in a BAS period you have already lodged, work out the adjustment and follow the ATO's process for correcting GST on a later statement.
Once corrected, mark the XBert as resolved.