Spending hours wrestling with your BAS, trying to figure out the complexities of capital purchases and the G10 label? You’re not alone.
Many business owners find this process time-consuming, stressful, and prone to errors.
This valuable time could be better spent focusing on growing your business. There’s a better way.
GeekBooks can help you simplify your capital purchases BAS reporting and reclaim your precious time.
This guide provides clear explanations and practical tips, empowering you to manage your capital purchases confidently and reduce BAS-related stress.
Unlocking Capital Purchases: Boost Your Business With the Right Assets
Capital purchases are significant investments in assets that provide long-term benefits.
Unlike everyday expenses like office supplies, these are items used in your business for more than one accounting period.
They are the building blocks of your business, helping you produce goods, deliver services, and generate revenue.
Capital purchases can be new or used as long as they are intended for long-term use in the business.
Capital purchases are key to business growth.
They:
- Boost efficiency
- Expand capacity
- Improve quality
Strategically investing in the right capital assets builds a strong foundation for sustainable growth.
Reporting Capital Purchases on BAS: The G10 Label
The G10 label on your Business Activity Statement (BAS) is specifically for reporting the GST included in your capital purchases.
This allows businesses to claim GST credits on these significant investments.
What is the G10 capital purchases label?
The G10 label, titled “Capital purchases,” captures the total GST included in the price of capital assets acquired for your business during the reporting period. It’s distinct from other business purchases like trading stock or operational expenses.
Why are capital purchases reported separately?
Separating capital purchases is essential for:
- GST credits: Reporting GST on capital purchases BAS via G10 enables businesses to claim these amounts back as GST credits, offsetting their GST liability.
- Depreciation: Capital assets are depreciated over their useful life, unlike regular expenses deducted in the same financial year. Separate reporting simplifies depreciation tracking.
- Financial clarity: Distinguishing capital purchases enhances financial analysis, offering a clearer view of asset investments and their long-term impact.
Items To Report on the G10
The following capital items should be reported on the G10 capital purchases label, including the GST component:
- Machinery and equipment: This includes manufacturing machinery, tools, medical equipment, kitchen appliances, and similar items.
- Office furniture: Desks, chairs, filing cabinets, and other furniture used in the business office.
- Computers and electronic devices: Desktops, laptops, servers, printers, monitors, and other IT equipment.
- Vehicles: Cars, trucks, vans, and other vehicles used for business operations.
- Land and buildings: Real estate properties such as office buildings, warehouses, retail spaces, and land used for business purposes.
If you acquire capital assets from associates (related entities), you must include the GST-inclusive market value of these items on the G10 label.
What Not To Report on the G10
Certain items should not be included as capital purchases on the G10 label:
- Trading stock: Goods purchased for resale are considered trading stock, not capital purchases. These are reported elsewhere on the BAS.
- Running expenses (stationery, repairs): Day-to-day operational expenses like stationery, office supplies, repairs, and maintenance are not capital purchases.
- Equipment rentals or leases: Payments for renting or leasing equipment are operating expenses, not capital purchases.
- Stamp duty: Stamp duty paid on the purchase of assets is not included in G10.
Note: There’s a cap on how much GST you can claim for passenger vehicles.
You can only claim GST on the car’s price up to the limit set by the ATO for that financial year.
Check the ATO website for the current car limit.
Non-Capital Purchases: The G11 Label
Non-capital purchases (reported on the G11 label of your BAS) are day-to-day expenses and purchases for immediate use or resale and are not intended for long-term business use.
They are also known as operating or revenue expenses.
Examples include:
- Trading stock: Goods bought for resale (e.g., a retailer’s inventory).
- Operational expenses: Daily running costs like:
- Office supplies
- Rent and utilities
- Marketing
- Repairs (to non-capital items)
- Salaries
- Insurance
- Raw materials: Used in manufacturing.
Reporting Purchases Under $1,000:
For GST, you need a tax invoice for purchases over $82.50 (including GST). For purchases under $1,000, you can use other records like receipts, EFTPOS slips, or credit card statements.
Keep clear records of all expenses to make BAS and tax reporting easier.
Small purchases count towards your total non-capital purchases for GST credits.
Capital vs. Non-Capital Purchases
Understanding the difference between capital and non-capital purchases is key for accurate BAS reporting and GST claims.
Key Differences:
- Purpose: Capital purchases are long-term investments; non-capital purchases are for immediate use or resale.
- Lifespan: Capital purchases last over one accounting period; non-capital purchases are consumed or sold quickly.
- Examples: Capital includes machinery and vehicles; non-capital includes office supplies and trading stock.
- GST: Capital purchases claim GST via G10 and are depreciated; non-capital GST is claimed via G11.
Why It Matters:
Misclassifying purchases can lead to incorrect GST claims and potential ATO penalties.
However, accurate classifications not only help you claim the correct GST credits but also ensure full compliance with regulations.
Avoid These Common Pitfalls
Several common errors can occur when classifying purchases:
- Overlooking minor capital purchases: Small items like an office chair or equipment can qualify as capital purchases if they’re for long-term use, but they’re often overlooked.
- Misclassifying expenses: Misclassifying expenses can lead to incorrect GST claims and inaccurate financial records. For example, treating a repair on a capital asset as a non-capital expense can skew depreciation calculations.
- Ignoring GST-exclusive amounts: On your BAS, report GST-inclusive amounts for capital purchases (G10) and understand how this affects GST claims. For non-capital purchases, report total purchases (including GST) in G11. Remember, you need a tax invoice for GST credits on purchases over $82.50 (including GST).
Take the Stress out of BAS Reporting—Let GeekBooks Help!
Mastering your capital purchases and the G10 label is the key to flawless BAS reporting and unlocking maximum GST credits!
This guide broke down the key differences between capital and non-capital purchases, showed you how to report them correctly on the G10 label, and pointed out common mistakes to watch out for.
Properly classifying your purchases is essential for accurate GST claims and compliance with reporting rules.
If BAS preparation still feels overwhelming, GeekBooks can help!
Our expert BAS preparation services ensure accuracy, compliance, and optimised GST credits.
Contact us today to learn more.