Even though the GST has been in effect since 2000, there are many small business owners still making common errors. In the majority of cases, these mistakes have to do with people over-claiming their GST credits.

In order to avoid some of the more common GST pitfalls, you should keep it firmly in mind that the GST is a 'transaction based' tax, which means you should be trying to analyse every transaction to figure out the right GST action to take.

Below are some common GST pitfalls you should try to avoid.

Claiming GST without Valid Tax Invoices

If you're registered for GST and hold a valid tax invoice, or recipient created tax invoice, you can claim a GST credit for purchases you made that cost you more than $82.50. For purchase amounts smaller than this, you still need to keep documents like dockets, receipts or invoices for five years to substantiate your claims.

Claiming GST on Personal Purchases

While it's okay to claim a partial GST credit for an item you purchase that is used partly for business use and partly for private purposes, it's important to only claim the percentage of the GST that is allocated for business use. Yet plenty of business owners seem to think a larger purchase, such as a motor vehicle, should entitle them to the entire GST credit available.

If you use that motor vehicle 50% for private use and 50% for business use, then you can only claim a credit for 50% of the GST.

Claiming a Full Credit on Partially Paid Items

If your accounting system is on a cash basis and you've only made a partial payment on an item, you will need to only claim a credit for the GST included on the amount you paid. Don't make the mistake of claiming the entire GST amount due on the full price if you haven't paid for it in full yet.

Not Claiming on Valid GST Tax Deductions

Plenty of business owners pay for purchases using their own credit cards or their own cash, but then they forget to track those expenses or report them. This can mean losing tax invoices that could mean claiming more rebates at tax time.

Not Keeping Good GST Records

Far too many small business owners don't keep a regularly updated book-keeping record of expenses, purchases and other accounting records. If you remember to add new costs incurred on a regular basis, it only takes a few minutes of your time and you won't risk missing out on a valid claim when it's time to lodge your BAS.