When the tax ledger and the lodged returns disagree

What was broken

A wholesale distributor discovered material mismatches between its indirect-tax returns, income tax filings and books of account, built up over several years. The inconsistencies raised the risk of notices and demands, and made the accounts unreliable for both financing and decision-making.

What we did

CapEasy carried out a multi-year reconciliation across indirect tax, income tax and the financial statements — identifying the sources of divergence, correcting returns where required, and aligning turnover, credit and tax positions into a single consistent picture. The corrections were documented to withstand any future departmental review.

Where it landed

The company’s indirect-tax, income tax and book positions were reconciled and brought into alignment, reducing exposure to notices and giving management reliable numbers to work from. A recurring reconciliation discipline was put in place.

The same drift happens between your BAS labels and your GST accounts

The failure in this engagement was not one bad return — it was years of small gaps between what the ledger said and what had actually been lodged, compounding until nobody could say which number was right. The Australian equivalent is the drift between your GST control accounts (GST collected, GST paid, the clearing account you settle each BAS against) and the G1, 1A and 1B labels you actually reported. A missed adjustment, a coding error that never got corrected, a BAS prepared from a ledger that was still moving underneath it — none of it is fatal on its own, but left alone for a few quarters it becomes the same tangle: books, returns and reality all telling a slightly different story.

The fix is the same discipline this engagement applied: reconcile GST collected and GST paid in the ledger against every lodged BAS, quarter by quarter, and resolve every gap back to its source transaction rather than plugging it with a journal entry that makes the total match.

Revision, not resubmission — and a deadline that does not move

The ATO draws a clear line between two ways of fixing a GST error, and which one applies depends on size and timing. Many GST and fuel tax credit mistakes can be corrected on your next BAS, within value limits tied to your current GST turnover — a small credit error, for instance, generally is not subject to a value limit at all, while debit errors (GST you should have paid but didn’t) are capped by a table the ATO publishes for the current lodgment period. Once an error falls outside those limits, or belongs to a period you can no longer correct on a later BAS, the fix is a revision of the original BAS itself — lodged for the specific period the error occurred in, not folded into the current one.

A revised BAS is treated as an application to amend your assessment for that period: if the ATO accepts the revised figures in full, the revision itself stands as the notice of amended assessment; if not, the ATO issues its own amended assessment. Either way, a revision needs the same thing a multi-year reconciliation produces — a documented trail from the corrected figure back to the transactions that support it, ready for review rather than assembled under pressure once a notice arrives.

The four-year wall on GST credits

One number in this framework does not bend. Your entitlement to a GST credit ceases four years after the lodgment due date of the BAS for the period in which you first could have claimed it, unless the credit was already included in an assessment before that date — and the ATO has no discretion to extend it. On a cash basis, that clock runs separately for each part of a payment made across multiple periods. A reconciliation that surfaces an unclaimed credit from five years ago finds a credit that is already gone; the same reconciliation run annually catches it while it is still claimable. Records themselves need to survive at least as long: GST records are kept for five years from when they were prepared or the transaction completed, whichever is later, and longer again if a period is under active review.

This is the argument for keeping a GST reconciliation as a standing month-end task rather than a periodic clean-up. CapEasy’s bookkeeping keeps the GST control accounts tied to the lodged BAS every period, with the reconciliation and its supporting detail ready for your registered BAS or tax agent, who reviews the position and prepares any revision that needs to be lodged with the ATO.