Hello! my name is Harry and this is my accountancy blog. It is my mission to use this blog to educate others about the benefits of hiring an accountant. I hired an accountant last year and doing so has brought many positives to my life. I now find it much easier to run my business and to manage my tax returns at the end of each financial year. I hope that by reading the articles I have posted here, you will gain a good understanding of how an accountant can help you. Thank you for stopping by and checking out my blog.
If you run an Australian business, then you are required to pay certain taxes to the ATO. Much will depend on the scale of your organisation, but often you will need to charge GST (goods and sales tax) and withhold taxes on behalf of your employees (PAYE). If your business is somewhat complex, then this tax collection process can be somewhat dynamic and unpredictable. How do you cope with this when it comes to reporting your figures to the authority, and what will happen if you make a mistake?
Dealing with Adjustments
When you sell goods or services to a third party, you will provide them with the solution, and they will pay you in return. Most of the time, this is a straightforward transaction and can be recorded in the books as and when it happens. Occasionally, however, you may have to reverse the specific transaction unexpectedly if, for example, you have to refund due to a return.
If this happens in the middle of a tax accounting period, then it will not affect the information that you send to the ATO. If it happens towards the end of such period, however, you may need to make an adjustment in the next period.
This is perfectly acceptable and is basically just an adjustment shown on your Business Activity Statement (BAS) for the next period.
Sometimes, you will have made a mistake, perhaps due to a clerical error, or through misclassification. You may record a particular purchase as taxable when it was tax-free or vice versa. In most cases, you may be able to correct the error in the next return that you lodge. However, there are certain limits, and you need to be aware of those.
Time and Value
For example, if you failed to include the tax on a taxable sale, much will depend on how long ago you made the error and on its value. If the error (or errors) amounted to more than $10,000, then you may not be able to correct it on a subsequent activity statement. If the error (or errors) took place more than 18 months ago, this may be outside of the error time-limit, and may not be reported on the current activity statement.
This can be confusing and especially if you are unsure about the time-limit or value limit. In this case, you should ask a BAS preparation service for further guidance. They will tell you how to handle these errors, and try to help you avoid them in the future.Share
20 October 2020