Reconcile GST to BAS

June 2021 Reconcile GST to BAS

Reconcile GST Cash or Accrual Correct BAS GST ICB Worksheet June BAS Mistakes ATO ICA

GST Cash Basis Reconciling GST on a cash basis to the balance sheet requires viewing not only the GST accounts, but the GST on outstanding receivables and payables. Recommended process includes: 1. Review GST Report for each quarter or month to ensure no changes over the year If changed, review why, and add GST to the June BAS if required. (Refer Correcting BAS Errors) 2. Calculate Prepare June BAS and calculate GST Calculate GST on outstanding creditors and debtors 3. Reconcile Reconcile GST for each quarter or month to BAS Lodged Use ICB Worksheet below and provide a PDF version to both client and accountant Reconcile GST on Balance Sheet

June Debtors Creditors Net GST BAS GST GST GST

GST Accrual Basis Reconciling GST on an accrual basis to the balance sheet requires viewing the GST accounts. Recommended process includes: 1. Review GST Report for each quarter or month to ensure no change over the year 2. Calculate Calculate June BAS 3. Reconcile Reconcile GST for each quarter or month to BAS Lodged Use ICB Worksheet below and provide a PDF version to both client and accountant Reconcile GST on Balance Sheet

June Net GST BAS GST

[EOY] Reconcile GST to BAS © The Institute of Certified Bookkeepers Page 1 June 2021

ICB BAS Worksheet Reconcile GST to ATO BAS Lodgement for both Cash or Accrual basis

BAS YTD Reconciliation Business: ABC COMPANY PTY LTD ABN: 000 000 000 Financial Year: 2020 Comparing BAS figures lodged to current reporting in accounting file BAS SOFTWARE DIFFERENCE Period BAS Lodged Current Reporting Difference 1A-GST 1A-GST Collected 1B-GST Paid W1-Wages W2-PAYGW Collected 1B-GST Paid W1-Wages W2-PAYGW 1A-GST Collected 1B-GST Paid W1-Wages W2-PAYGW July 29742 7934 29742 7934 0 0 0 0 August 37891 10214 37890 10214 0 0 -1 0 September 39115 18366 29426 7788 39115 18331 29426 7788 0 -35 0 0 October 30988 8466 30988 8466 0 0 0 0 November 42219 12093 42219 12093 0 0 0 0 December 32430 14702 38994 10667 32431 14702 38994 10667 1 0 0 0 January 37847 10201 37847 10201 0 0 0 0 February 29395 7790 29395 7790 0 0 0 0 March 26484 13119 30732 8362 26484 13119 30732 8362 0 0 0 0 April 30109 8082 30109 8082 0 0 0 0 May 36991 9933 36991 9933 0 0 0 0 June 31582 8716 31582 8716 0 0 0 0 TOTAL/June+Adj 98029 46187 405916 110246 98030 46152 405915 110246 1 -35 -1 0 Preparing June BAS 1. Review prior BAS for the year to ensure any changes that were made to transactions after lodgement of the BAS are picked up and reported in this quarter. Also, to re-check that no mistakes were made. Reprint/display the summary report of either CASH or ACCRUAL and compare the reports with the lodged BAS reports for Q1-Sep, Q2-Dec, and Q3-Mar.

Note: We recommend using ICB's GST reconciliation spreadsheet to help with calculation and reporting.

Print the GST report(s) for the whole year and compare the totals to BAS paid in Q1-Sep, Q2-Dec, and Q3-Mar plus Q4-Jun. If this balance, then it confirms no changes have been made to GST. If no change, prepare the Q4-Jun BAS. If any change, compare the current GST report with the lodged GST report printed at time of BAS. Recommend export the report to excel to help find the change. Check the bank reconciliation screen to see if any additional transactions have been added to prior periods. If the error is below the GST correction error thresholds, adjustments can be made in the Q4-Jun BAS bringing everything in line. 2. Correcting mistakes in prior BAS is allowed by increasing or decreasing GST paid or collected, see the links on this page for more detail: ATO – Correcting GST errors 3. Correct the mistake by manually decreasing or increasing 1A or 1B in the Q4-Jun BAS. 4. Before preparing the Q4-Jun BAS, reconcile GST accounts as above for either cash or accrual. 5. Prepare Q4-Jun BAS. 6. Copy all the financial year BAS for Accountant (comment if any changes have been, made including detailed GST reports to back up the BAS reports).

[EOY] Reconcile GST to BAS © The Institute of Certified Bookkeepers Page 2 June 2021 Correcting BAS Mistakes Correcting mistakes in prior BAS is allowed by increasing or decreasing GST paid or collected, if mistake is due to: Clerical errors Incorrectly recorded taxable sale/purchase as GST-Free Mistakenly classified GST-Free sale/purchase as taxable See ATO – Correcting GST errors Correction Limits – Credit Errors Credit errors can be corrected on a later activity statement if it is lodged within four years of lodgement of the original BAS that contained the error. Credit errors are not subject to value limits. Correction Limits – Debit Errors

Annual turnover Correction limits* Time limits** Less than $20m. Less than $10,000 Up to 18 months $20m to less than $100m. Less than $20,000 Up to 12 months $100m to less than $500m. Less than $40,000 Up to 12 months $500m to less than $1b. Less than $80,000 Up to 12 months $1b. and over Less than $450,000 Up to 12 months

* These correction limits are net results of corrections ** The time limit applies from the lodgement due date of the original BAS period, not from the actual lodgement date. Correct the mistake by manually decreasing or increasing 1A or 1B: Within correction limits, make adjustment in your current BAS. Outside the time or value limits, revise the original BAS. For GST annual returns, amend on your next return within correction limits. Value limits apply only to debit errors, not credit errors. The correct term is now “Debit error value” limit, not “correction” limit. Credit errors may be offset against the sum of debit errors. How the error arises is no longer relevant to credit errors. ATO Integrated Client Account (ICA) The ATO Client Account Statement is a running balance of what the client owes to the ATO for BAS lodgement, showing all charges, payments and interest charged for that ABN entity. It is available to clients, but only issued where a General Interest Charge (GIC) was imposed, and the account balance was in excess of $420 DR. After review with tax practitioners, the statement is now being issued across a broader range of circumstances. ATO Client Activity Statement can now also be viewed via the ATO Online Services (See following example)

[EOY] Reconcile GST to BAS © The Institute of Certified Bookkeepers Page 3 June 2021

Bookkeeping Process Best practice bookkeeping involves reconciling the ICA statement with the ICA Liability clearing account established on your balance sheet to bring in General Interest Charged by the ATO, see below journal.

Account DB CR Tax Code Interest Charged $120.30 Not Reportable ICA Liability Account $120.30 Not Reportable

Enter BAS Payment/Allocation Enter the BAS payment using the full values from GST reports, and allocating the rounding amounts to a rounding account – usually set up as an expense account. This may be done automatically within the software by journal, but check dates are correct and the amounts are correct.

PAYMENT TO ATO – BAS APR TO JUN 20XX

ALLOCATION DEBIT CREDIT Tax Code GST Collected $773.64 Not Reportable GST Paid $776.50 Not Reportable PAYG Withholding $1,180 Not Reportable Rounding $0.14 No Tax TOTAL to BANK or ICA Liability Account $1,177

Troubleshooting What can cause an out of balance? Changed transactions in previous periods, not picked up and adjusted/corrected in subsequent BAS periods. Some out of balance amounts may be due to rounding – journal the amount to a rounding account. If for example the file has been in use for many years but never reconciled, the rounding amount might be substantial. Direct allocation of journals/purchases/expenses to GST control accounts – enter or edit transactions to the correct accounts. Changing the amount of GST calculated by software – check these adjustments and, if necessary, allocate difference to rounding account. Negative amounts on tax summary reports – for example for No ABN Withheld or Voluntary Withholding amount. These amounts are accounted for on a CASH basis only and reported when payment is made. Make sure they have recognised payment breakup correctly: PAYG (4), Fuel Tax Credits (7a or 7b), PAYG Income tax instalments (5a or 5b), WEG/WET. Check that these amounts have been distributed to their correct general ledger accounts. Resources ICB – Correcting a Mistake on a BAS ICB – BAS Reconciliation Common Errors and Issues ICB – End of Year Resources ICB – BAS Reconciliation Worksheet MYOB – Checking your BAS prior to Lodgement XERO – Troubleshooting the GST Reconciliation report XERO – The Simpler Business Activity Statement QuickBooks Online – Video tutorials – GST and BAS Reckon – Support