Why you should use the GST instalment method

Being the start of another activity statement year, one can exercise the choice as to the method to be used to calculate GST and pay GST for the 2015/16 year.

We recommend that Option 3 GST Instalments be selected in most cases for those that lodge a quarterly BAS.

Option 3 (which is only offered to small businesses with turnover of less than $2,000,000) is far and away the best option in the majority of cases as:-

• It reduces our fees by our not having to prepare BAS’s or amend those prepared by clients (at the risk of being misunderstood, there are matters that only come to light when preparing annual financial statements and which require past BAS’s to be amended).
• One doesn’t have to amend BAS’s for where a tax invoice is not held by the time a BAS is lodged.
• If profits are increasing, then one’s GST net liability will also be increasing.  The instalment will represent an under payment as the ATO advised instalment is based off the prior year’s lodged activity statements.  In most cases, the shortfall is not payable until May of the following year so one receives an interest free loan from the ATO to pay any GST shortfall.
• If the instalment is too high, then it can be varied downwards (but best left until at least the second and preferably the third or fourth quarter when the year’s position becomes clearer).

Please contact us if the ATO have marked on your BAS that Option 3 is not available.  This is often simply an ATO error and one that we can easily have rectified.

If Option 3 is adopted, then the ATO will issue an Annual GST Return at the end of the financial year.  This form is used to net off the actual liability against the instalments paid.  The form is required to be lodged by the time the Tax Return is lodged and by which time a shortfall is to be paid or a refund will be generated.

At MRS, we will spend today planning for your success tomorrow.

At MRS, we will spend today planning for your success.