BAS and reporting
Net GST amount
The net GST amount is the GST you collected on sales minus the GST credits you can claim on purchases, and it determines whether you pay the ATO or receive a refund.
The net GST amount is the bottom line of your GST position for a reporting period. It is calculated by taking the GST you charged on taxable sales and subtracting the GST credits you can claim on business purchases. If the result is positive, you pay that amount to the ATO. If it is negative, you are generally entitled to a refund, which the ATO may check before paying.
On the BAS, the two components appear at label 1A, for GST on sales, and label 1B, for GST on purchases. Your accounting software calculates them from the tax codes on each transaction. The net amount is the difference between the two figures. Understanding this simple formula makes it much easier to forecast your tax bill and to spot odd results that might indicate coding errors.
Several items feed into the net amount. Sales that are GST-free or input-taxed do not add to 1A. Purchases without a valid tax invoice, purchases that relate to input-taxed sales, and private purchases do not give a credit. Adjustments, for example for bad debts, returns or a change in how an asset is used, can increase or decrease the net amount. The result therefore reflects more than simple sales and purchases.
The net amount depends on your accounting method. On a cash basis, sales and purchases count when money is received or paid. On an accrual basis, they count when invoices are issued or received, regardless of payment. This can make the net amount very different in the same period, particularly if customers pay late. Choose your method carefully and keep to it consistently.
A negative result is not automatically a problem, and a large positive result is not necessarily bad. Businesses that make big purchases or that export goods often have refunds. Those with strong sales often owe more. The key is that the figures are supported by records. The ATO uses data matching to review unusual patterns, so unexplained swings may prompt questions.
Do not confuse net GST with profit. The GST you collect is not your income; it is money held for the ATO. Setting it aside as you go prevents cash flow problems at BAS time. Records must be kept for five years. This is general information only, so confirm your calculations with the ATO or a registered tax professional.
Worked example
In a quarter, Lily's shop has taxable sales of $82,500 including GST, so label 1A is $7,500 (82,500 divided by 11). She has business purchases with tax invoices totalling $33,000 including GST, so label 1B is $3,000. Her net GST amount is $7,500 minus $3,000, which equals $4,500 payable to the ATO by the due date.
Practical tips
- Work out your net GST regularly during the quarter so the BAS payment is never a surprise.
- Treat collected GST as money held for the ATO, not as business income.
- Investigate any unusually large or negative result before lodging, as it often points to a coding mistake.