Question about changes to a sale in last financial year + GST questions

[dont_waste_dollars]

Gday all,

Im doing my first tax return and paying my first installment of gst as a sole trader and i have a few questions about that.

What if a sale made on say may 12th had a warrenty claim, that item is now out of stock and i have the buyer refunded as a result in this financial year? Do i simply remove that sale from last years books? do i keep it there and put something in this years that would be something like buyer refunded 11th JUL - $27 profit, -$20 GST etc and reference the original sale? 

Normally if i have an item refunded or its out of stock. i just refund the buyer and delete the sale from my records. ( my suppliers cover all costs when an item is returned, so i just lose the profit made)

And what if i pay my BAC for the quarter then a sale is refunded. do i minus the GST from my next one??

Basically any information reguarding sales and gst and how to manage them going from different tax returns and BAC's

Thankyou so much

[harley_babes_hoard]

These are questions you should be asking your accountant. What is BAC? do you mean BAS statement? You only need to register for GST if your turnover is more than 75,000.

[chameleon54]

Looking at the OP's feedback scores and average selling price per item of just over $300 per item sold, they would be turning over substantail sums of money. (  Congratualions OP, no mean feat on ebay these days ). As Harley says it may be best to find a good accountant if you dont already have one. A business with your turnover figures definately would benefit from their experience and the savings they make for you, may well cover the expense of their services. It may be better to find a specialist accountant with small business experience, rather than the generic ones that have offices everywhere.

BAS stands for Business activity statement which is the orange / brown form you submit either monthly, quarterly or annualy. It is possible to show an "adjustment" to your income tax and GST payments if you have claims that cross from one year to the next. I,m not sure of the process as my accountant handles this.

[jensmanchester-australia]

If you are using the cash accounting method on your BAS the GST from the sale stays in the last quarter and the GST refunded is applied as a GST credit in the current quarter.

Basically with the cash accounting method it is based on the date the actual transaction takes place.

[dont_waste_dollars]

HAHA yeah i meant BAS... BAC would be blood alcohol content. 

Yeah i plan on seeing an accountant before i submit it and do my tax return, just trying to get as much info i can myself so they dont have to sit there and explain it to me and have me looking clueless. 

I have a fairly good spreadsheet containing all my bookwork and if i understand correctly i can just add in the gst credits and take away the profit from my 2015/16 tax return and this quarters BAS. Seems simple enough to record. Just obviously havent had to think about it until now.

Another thing, may not be very imortant. But say the item was worth 400 dollars, therefore 400 would attribute to that years turnover. If it gets refunded in this financial year... what happens to that turnover. eg if 14/15 years turnover was 93,400. do i then minus 400 from the 15/16 at the time the refund was made? if you understand what i mean. Im assuming as long as the ATO gets the tax and gst they are suppose to, the turnover of the business being slightly out wouldnt really matter would it. I only ask because the first question on my BAS is Total sales, which would be turnover for that quarter. If the turnover was 20,000 then after that quarter a refund is made which effectively reduces that number, do i minus that figure ( say 400 ) from my next BAS? or does that really not matter as long as the GST figures are correct?

Cheers Lads

[jensmanchester-australia]

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@dontwastedollarsaustralia wrote:

HAHA yeah i meant BAS... BAC would be blood alcohol content. 

Yeah i plan on seeing an accountant before i submit it and do my tax return, just trying to get as much info i can myself so they dont have to sit there and explain it to me and have me looking clueless. 

I have a fairly good spreadsheet containing all my bookwork and if i understand correctly i can just add in the gst credits and take away the profit from my 2015/16 tax return and this quarters BAS. Seems simple enough to record. Just obviously havent had to think about it until now.

Another thing, may not be very imortant. But say the item was worth 400 dollars, therefore 400 would attribute to that years turnover. If it gets refunded in this financial year... what happens to that turnover. eg if 14/15 years turnover was 93,400. do i then minus 400 from the 15/16 at the time the refund was made? if you understand what i mean. Im assuming as long as the ATO gets the tax and gst they are suppose to, the turnover of the business being slightly out wouldnt really matter would it. I only ask because the first question on my BAS is Total sales, which would be turnover for that quarter. If the turnover was 20,000 then after that quarter a refund is made which effectively reduces that number, do i minus that figure ( say 400 ) from my next BAS? or does that really not matter as long as the GST figures are correct?

Cheers Lads

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Yes - if you refund in the next financial year you take the refund amount of your total sales figure for that year.  Basically the sale goes in the turnover for one year and the refund is accounted for the following year.

If you are turning over a reasonable amount each year it might be worthwhile looking at a system such as Xero which works brilliantly for online sellers. Depending on the plan you choose they can start from as low as $20.00 a month and it is very easy to use - cuts out the necessity for keeping spreadsheets etc and when the time comes do your BAS it takes about 2 minutes to generate a BAS report for you with all the all the boxes nicely filled in with the correct figures.

Moving across to Xero is the best thing I ever did for my business as it saved me hours of time as before I used to do my records manually.

[lane-ends]

The way I had it explained to me is not thinking about the money per transaction/invoice, but rather total money in during a period and total money out during a period. ie, the actual date the money is recieved or paid.The actual transaction it relates to is unimportant (other than being a legitimate business transaction).

[dont_waste_dollars]

That sort of leads into my next question. 

I was going to ask If i for example i refunded a sale that occured in a previous tax and GST reporting period but i hadnt submitted the tax return or bac for that period yet, could i just do the alterations to those records? instead of putting the refund transaction in the current reporting period? 

It just seems easier to delete the sale from the books and fix the figures for the reporting period the transaction was in (obviously if not submitted yet) rather than have a positive transaction for say May and then essentially cancel it out in July.

Im assuming the latter is the correct way, but then what if i made a sale on may 1st and a rebate or refund or something along those lines was given on may 9th. would i have to record those changes under may the 9th or could i just alter the original sales record as i have been doing?

I guess this is not extremely important, but im assuming if i ever got audited they would expect things a certain way and i like to do things right. 

[jensmanchester-australia]

With refunds they are basically just another business expense - just like your postage costs, ebay fees, paypal fees etc so you need to set up a column in your expenses worksheet for refunds.

If you just alter the records you are not showing the two transactions which took place - ie the sale and then the refund. From a tax point of view if the BAS hadn't been submitted then just altering the original record isn't going to make any difference to how much GST you have to pay however you don't have a record showing of the two separate transactions.

To do it correctly you should have the two transactions showing separately. The sale would go into you sales (income) column on, for example,  1st of May and the refund would go into your expenses column on, for example, 9th of May.

[lyndal1838]

Just because you have not submitted your BAS it does not mean you can just delete a transaction from your records.   That also applies to the financial year transactions.

Just as an example.......we receive our money from our principal contractor on a Thursday.   The money appears in our business account on Friday but is dated for Thursday.   If Thursday happens to be the end of the month then we pay GST on that money in the month it was received.

On the Friday, I transfer our pays into our personal bank account.....the income tax is calculated and added to the BAS the following month.

If you happen to forget a transaction during one BAS reporting period you can claim it the following reporting period.

Your example of just deleting a whole transaction if a refund is given in the same month is likely to get you into bulk trouble if you are audited.  You may well be able to explain it to the satisfaction of the auditor but believe me you would rather not have to.

I have lived through 2 ATO audits of businesses as well as one personal one....nothing was wrong, but in one case they asked a few curley questions that I was not able to answer without contacting our accountant.