GST and business systems: large business

Large businesses may report incorrect amounts of goods and services tax (GST) if their systems for capturing and recording GST information fail.

Failure may occur because systems have weaknesses or issues to start with, or because they are left unchecked for long periods of time.

Human error can also be a major factor. The need for human intervention and interpretation increases where systems are amalgamated, or there is a need to identify and treat unusual transactions.

To limit errors occurring, we encourage you to review your business systems, processes and controls regularly:

• check whether you are at risk
• find out where common errors occur
• check your business systems – we have a guide to help you
• how to get the form
• report an error.

Check whether you are at risk

Businesses going through change are most at risk of reporting GST incorrectly. This includes businesses that are:

• growing rapidly
• restructuring
• going through a merger or demerger
• installing new accounting software
• experiencing a change in accounting staff.

We recently identified almost $350 million in unreported GST liabilities after contacting over 1,000 large business taxpayers that we considered were at risk of incorrectly reporting GST.

The industries that had the highest number of GST reporting adjustments as a result of our contact were:

• manufacturing – accounting for 33% of adjustments
• electricity, gas, water and waste services – 18%
• wholesale trade – 12%
• financial and insurance services – 11%
• construction – 5%.

The remaining 21% of adjustments were spread across the other 14 industries listed in our business industry codes (hierarchical index).

Common errors

The following table is based on recent statistics and shows some common examples and types of GST reporting errors made by large businesses.

Area of error	% of total errors in the period	Types of error
BAS preparation	27%	Transposition errors GST control accounts not cleared Not including invoices produced outside normal accounting systems
Transaction classification	19%	Over-claimed international travel and entertainment expenses Early termination fees charged under retail customer contracts incorrectly treated as being not subject to GST Claiming GST on total tax invoice amounts when part of the transaction was not subject to GST Incorrect interpretation/review processes for amended legislation concerning taxable supplies
Communication between related entities	19%	Both entities claiming the same expense item Incorrect transfer of GST information between entities GST credits being claimed for tax invoices created by recipient although no agreement had been established between the recipient and the supplier
System-related	15%	Processing rebates incorrectly System errors when using luxury car tax (LCT) software Incorrectly treating sales as taxable when supplied to a member of a GST group Not adjusting for bulk purchase discount Using outdated formulas
One-off supply of assets	7%	Making incorrect attributions in relation to a hire purchase arrangement Errors in calculating GST on adjustments at time of settlement of land purchase
Business structure change	2%	Coding errors when merging two business systems
Other	11%	Problems associated with staff turnover Technical understanding and interpretation

Check your business systems

Our interactive guide, GST governance and risk management guide for large businesses, will help you assess the effectiveness of your internal assurance processes and procedures against a list of best-practice actions.

If you would like assistance in conducting an assessment, contact your ATO client relationship manager. Your advisers may be interested in reviewing the results with you or assisting with the assessment or its findings.

How to get the form

Double clicking the form won't open it. The form will not load on a mobile device, tablet or within a browser.

To complete the form, you must save it to your desktop computer or laptop (with the latest version of Adobe Acrobat installed).

• To download, right click on the link below and select Save target as (or a similar option depending on your internet browser) to save it to your computer.
• GST governance and risk management checklist for large business (NAT 73616, PDF, 646KB). This link will download a file  
• Open your saved form with Adobe Acrobat Reader DC and enable JavaScript if prompted before filling in the form.
• Once you've completed your form, save it using the Save form button at the end of the form.

Tip: Update your default app for pdf file types to Adobe Acrobat Reader DC to open all pdf files with Adobe Acrobat.

Report an error

After reviewing your business systems and controls you may discover an error or discrepancy with your reported GST. If this happens, we encourage you to contact your ATO client relationship manager to discuss your business' options for correcting the error.

See also

• Correcting GST errors – how to correct errors made on an activity statement you have already lodged
• Make a voluntary disclosure – reduced penalties may apply if you let us know about a mistake before we notify you of an examination.

Identifies common errors made by businesses and explains how ineffective business systems and processes can cause GST reporting errors.