BAS and reporting
Label 1B
Label 1B on the BAS is the field where you report the total GST credits you are claiming on business purchases and expenses for the period.
Label 1B sits next to 1A in the GST section of the BAS. It is where you report the GST credits you are entitled to claim on your business purchases, expenses and certain adjustments. The figure is subtracted from the GST on sales at 1A to give the net GST amount. A larger 1B reduces what you owe, or increases your refund.
To claim a credit, you generally need to be registered for GST, have bought the item for your business, have paid or become liable to pay for it, and, for purchases over $82.50 including GST, hold a valid tax invoice. Credits generally go into the BAS for the period that relates to the invoice or payment, depending on your accounting method, and can usually be claimed within four years.
Not every purchase gives a credit. Items used to make input-taxed supplies, such as financial supplies or residential rent, do not carry credits. Private purchases do not qualify, and if an item is partly private, only the business portion is claimed. Some purchases do not include GST in the first place, such as GST-free purchases, wages and many government charges, so there is nothing to claim.
The usual way to find the figure is to add up the GST on all purchases coded with a GST-bearing tax code, such as GST on expenses or GST on capital. Your software calculates it from the invoices you have entered. These feed into G10 for capital purchases and G11 for non-capital purchases, and the credits from both appear in 1B.
Errors at 1B are among the most common reasons for ATO reviews. Examples are claiming credits without a valid tax invoice, claiming the full amount on mixed-use items, or claiming GST on purchases that are actually GST-free. Check large items carefully and make sure each is supported by a valid invoice addressed to your business. Keep the documents for five years.
Also remember that adjustments, such as for bad debts written off or a change in the use of an asset, may increase or decrease the figure at 1B. If in doubt, ask your adviser. This is general information only, so confirm your situation with the ATO or a registered tax professional.
Worked example
Over a quarter, Mei buys business supplies and equipment totalling $44,000 including GST, all supported by tax invoices. The GST credit is $44,000 divided by 11, which is $4,000. She also bought a $2,200 item for private use, which she correctly leaves out. She reports $4,000 at label 1B, and this reduces her net GST payable.
Practical tips
- Make sure each purchase over $82.50 has a valid tax invoice addressed to your business before you claim it.
- Claim only the business portion of mixed-use purchases.
- Check whether a purchase actually included GST before claiming, since GST-free items have no credit.