Xero GST on Capital: BAS Labels G10 and 1B Explained

Under Simpler BAS — the default GST reporting method for Australian businesses with GST turnover under $10 million — capital purchases in Xero are coded with the GST on Expenses tax rate and flow only to label 1B. Labels G10 and G11 are not required, and the ATO rejects a Simpler BAS lodgement that contains them. Full BAS reporters restore Xero's archived built-in GST on Capital rate so that capital purchases populate G10 with the GST-inclusive total and 1B with the GST portion. That single paragraph resolves most of what people are searching for when they look up Xero GST on capital BAS G10 1B; the rest of this article explains why, how, and how to verify the result.

The deciding question is which BAS your file is on. Simpler BAS eligibility under the $10 million GST turnover threshold is the official rule: Simpler BAS is the default GST reporting method for Australian businesses with a GST turnover of less than $10 million, reducing the labels they must report to G1, 1A and 1B. Full BAS applies once turnover sits at or above $10 million, or when a business has elected Full BAS reporting for its own reasons. The vast majority of Australian small businesses sit comfortably below the threshold and lodge Simpler BAS by default.

If your file is on Simpler BAS, you can stop worrying about G10 right now. It is not on your lodgement and is not required. Every capital purchase's GST portion lands in 1B alongside the GST on regular expenses, whether the purchase was a $55,000 vehicle or a $55 keyboard. Sections 5, 7, and 8 below are the ones that matter for you: how to code the transaction, how to confirm 1B looks right on the Activity Statement, and the three mistakes that derail the figure.

If your file is on Full BAS, both G10 (capital purchases, reported GST-inclusive) and G11 (non-capital purchases) are required on your lodgement, and Xero won't populate G10 until the archived GST on Capital rate is restored and capital purchases are coded against it. Section 6 walks the restore path and flags the custom-rate trap that catches Full BAS reporters who try to recreate the rate manually.

This article is the focused capital-purchases answer; for the broader BAS preparation workflow in Xero — registration, lodgement frequency, payment basis versus accrual basis, and the end-to-end BAS cycle — the sibling piece covers that ground without overlapping the G10 and 1B mechanics here.

What G10 and 1B Actually Represent on a BAS

G10 is the total value of capital purchases for the BAS period, reported GST-inclusive. The figure that goes in G10 is the gross amount the business paid, including GST — not the net cost of the asset. A $55,000 vehicle purchase made up of $50,000 cost plus $5,000 GST sits at $55,000 in G10. The most common error on the label is to net it down to $50,000 out of habit; the form does not want the net.

1B is the GST portion of all purchases for the period — capital and non-capital combined. Using the same vehicle example, 1B picks up the $5,000 GST element of that purchase, alongside the GST on every other deductible purchase the business made in the quarter. 1B is the figure the ATO credits against the GST you collected (label 1A) when it calculates the net GST result for the period. If you collected $20,000 in GST on sales and 1B comes to $7,000 across all your purchases, the net amount payable to the ATO is $13,000.

The muscle-memory pitfall is worth naming once before it becomes a Xero question. Bookkeepers spend most of their year reporting net-of-tax figures — expenses on the P&L, deductions on an income-tax return. G10 breaks the pattern. It is gross-inclusive, and reporting it net is one of the most common reasons an otherwise correct BAS gets corrected down the line.

G11 (non-capital purchases) follows the same gross-inclusive rule for the same reason, so the pattern on the purchases side of the form is consistent: G10 and G11 are gross, 1B picks up the GST inside them. The rest of this article concentrates on the G10 and 1B vertical — what feeds them, what doesn't, and how Xero specifically gets a transaction from a coded bill to a populated label.

How Xero's Tax Rates Map to BAS Labels G10, G11, and 1B

Xero populates the purchases side of the BAS by looking at the tax rate on each transaction line and routing the line to the matching label. There is no separate capital-purchase flag, no asset-account checkbox, no special posting rule based on the chart of accounts. The tax rate is the entire mechanism. Get the rate right and the label populates correctly; get it wrong and no amount of fixing the chart of accounts will move the figure.

The full mapping for Australian organisations runs as follows.

G10 — Capital purchases (Full BAS only) is populated by transactions coded with:

• GST on Capital — capital purchases that include GST.
• GST Free Capital — capital purchases that are GST-free (a category that is rare in practice but legitimate, for example for some farm equipment).
• GST on Capital Imports — capital purchases brought in through customs where the GST has been paid at the border.

The Activity Statement aggregates the GST-inclusive totals of these transactions into G10.

G11 — Non-capital purchases (Full BAS only) is populated by transactions coded with:

• GST on Expenses — the standard 10% GST rate for everyday business expenses.
• GST Free Expenses — expenses that are legitimately GST-free, such as bank fees, residential rent, and most fresh food.
• GST on Imports — non-capital purchases where the GST has been paid at the border.
• Any expense-account transactions coded Input Taxed — typically rent on residential property held by the business, or interest-bearing financial supplies.

1B — GST on purchases is populated by the GST portion of every transaction coded with any of the rates above that actually carries GST. The same line therefore contributes its full GST-inclusive value to either G10 or G11 (Full BAS only) and its GST element to 1B. Under Simpler BAS, G10 and G11 drop off the lodged form and only 1B remains as the purchases-side figure.

One constraint shapes the rest of this article: only Xero's built-in tax rates drive Activity Statement reporting. A custom tax rate created in the file — even one named identically to a built-in rate — does not route transactions to BAS labels. The Activity Statement looks at the rate's underlying system identifier, not its display name. That single fact is what catches users who, unable to find GST on Capital in the dropdown, create their own and then find the Activity Statement still empty at G10.

The mapping above reflects Xero's published behaviour for the Activity Statement and Simpler BAS reports, cross-checked against the Default Tax Rates AU and How Xero Populates the Simpler BAS pages in Xero Central.

Why "GST on Capital" Isn't in Your Xero Tax-Rate List

When a Xero organisation is on Simpler BAS — the default for any file set up for an Australian business under the $10 million GST turnover threshold — Xero archives a defined set of advanced GST tax rates that the Simpler BAS lodgement does not need. The archived rates have not been deleted from the file. They sit in the Archived view under Accounting → Advanced → Tax Rates, available to be restored, but they no longer appear in the tax-rate dropdown when you are coding a bill or a spend money transaction.

The archived rates are:

• GST on Capital
• GST Free Capital
• Input Taxed
• GST on Capital Imports
• GST Free Exports

The retained rates — what you see in the dropdown on a Simpler BAS file — are:

• BAS Excluded
• GST Free Expenses
• GST Free Income
• GST on Expenses
• GST on Income
• GST on Imports

This is not a bug, a missing module, or a subscription limitation. Xero archived the advanced rates deliberately to align the tax-rate surface with what a Simpler BAS lodger actually needs. Under Simpler BAS, the lodgement form contains only G1, 1A, and 1B; the archived rates exist to feed labels that no longer appear on the form. Surfacing them in the dropdown would invite users to pick rates that have no effect on what gets lodged, and create exactly the custom-rate confusion that section 6 covers.

Whether to restore the rate depends on the file. The next two sections work through it — coding under Simpler BAS first, then restoring the rate for Full BAS reporters and for internal asset-reporting separation.

Coding Capital Purchases Under Simpler BAS (Including the Chart-of-Accounts Question)

Under Simpler BAS, code capital purchases with the GST on Expenses tax rate. That is the answer, and it is the same rate you would use for a packet of printer paper. The $50,000 van and the $50 stationery item both flow through the same tax rate and land in 1B with the GST element each carries; the form does not distinguish between them. There is no rate to look for, no separate switch to flick, and no special treatment to apply.

The reason this looks wrong but is correct is on the ATO side. A Simpler BAS submission must not include values for G2, G3, G10, or G11. Attempting to lodge a Simpler BAS with G10 populated returns ATO error code CMN.ATO.AS.EM200, with the message "For simpler BAS lodgement labels G2 or G3 or G10 or G11 must not be provided." Code the capital purchase with GST on Capital (assuming you have restored the rate), and the lodgement fails. Code it with GST on Expenses, and the GST element lands in 1B alongside every other purchase's GST. The Simpler BAS lodgement contains only G1, 1A, and 1B, and 1B is where the GST credit for the capital purchase actually appears.

The follow-on question is the chart of accounts. The BAS coding decision and the chart-of-accounts decision are independent of each other, and confusing the two is the second most common source of self-doubt on a capital purchase entry. The tax rate on the transaction line controls which BAS label the line feeds. The account on the transaction line controls how the value sits in the books — as an asset on the balance sheet or as an expense on the P&L. A $50,000 van still posts to a Motor Vehicles fixed-asset account in the chart of accounts; under Simpler BAS, the tax rate on that line is GST on Expenses. The accounting treatment (capitalise as an asset) is intact even though the BAS-line tax rate uses the word "Expenses".

Depreciation is a separate workflow again. It is posted as a journal — usually at year-end, sometimes monthly — that debits a depreciation expense account and credits the accumulated depreciation contra-asset against the original fixed-asset account. The journal has no BAS implication. For bookkeepers who maintain the underlying workpapers, extracting an Australian tax depreciation schedule for fixed-asset workpapers covers how to produce the depreciation schedule itself from the asset register, separately from the BAS coding question this article addresses.

So the full picture for a Simpler BAS capital purchase: post the bill to the fixed-asset account in the chart of accounts, set the tax rate on the line to GST on Expenses, and the GST element will appear in 1B on the lodged Activity Statement. No restored rate, no custom rate, no separate journal at BAS time.

Restoring "GST on Capital" for Full BAS Reporters (and the Custom-Rate Trap)

There are two genuine reasons to bring GST on Capital back into the active tax-rate list.

The first is Full BAS reporting. If the business has GST turnover at or above $10 million, or has elected Full BAS for any reason, G10 and G11 are required on the lodgement and Xero needs the capital-rates back to populate them. The Activity Statement aggregates by tax rate (per section 3), so a capital purchase coded GST on Expenses will land in G11 with everything else, not in G10 where Full BAS lodgement expects it.

The second is internal capital-vs-non-capital separation on a Simpler BAS file — typically for asset accounting, internal management reporting, or the bookkeeper's own audit trail when reviewing a quarter. The GST Calculation Worksheet and the Activity Statement report view both display G10 and G11 internally based on the coded tax rates, even when only G1, 1A, and 1B will be lodged. Restoring GST on Capital does not affect what reaches the ATO under Simpler BAS; it only affects what shows up in the internal report views, which is enough reason for some practices to do it.

The restore path is short:

1. Go to Accounting → Advanced → Tax Rates.
2. Filter the list to Archived.
3. Tick the rates the file needs — at minimum GST on Capital, and any related rate the workflow uses (GST Free Capital, GST on Capital Imports, Input Taxed if there is residential property in scope, GST Free Exports if the business exports).
4. Click Restore.

The rates return to the active tax-rate list and are immediately available to code on transactions from that point forward. Past transactions coded under different rates do not change retrospectively; only newly coded lines pick up the restored rate. For a Full BAS reporter changing over a file mid-cycle, that means existing transactions that should sit in G10 need to be recoded one by one (or via Find and Recode if the practice has access to it).

The custom-rate trap deserves explicit attention because it catches users who follow what feels like the obvious workaround. When GST on Capital is missing from the dropdown, the instinct is to create a tax rate manually with the same name and rate. Transactions coded against that custom rate will not populate G10 on the Activity Statement. Only Xero's built-in GST on Capital rate drives BAS label reporting, because the Activity Statement looks at the rate's underlying system identifier rather than its display name. A custom "GST on Capital" rate has a different identifier and is invisible to the BAS aggregation, regardless of how identically it has been configured. If the file already contains transactions coded against a custom rate, restoring the built-in rate by itself is not enough — those transactions need to be recoded to the restored built-in rate, line by line. Renaming the custom rate, deleting it, or editing its configuration does not fix the underlying problem; only recoding the affected transactions does.

One ATO concession is worth knowing for Full BAS reporters at the smaller end. A Full BAS lodger with GST turnover under $1 million who does not separately track capital from non-capital purchases is permitted to put capital purchases valued over $1,000 on G10 and everything $1,000 or under on G11. This is an ATO simplification for small Full BAS lodgers and is not relevant to Simpler BAS reporters, who do not populate either label.

Once the built-in rate is restored, the mapping in section 3 is fully active: capital purchases coded GST on Capital flow their GST-inclusive total to G10 and their GST element to 1B, and the Activity Statement report reflects both figures.

Verifying Capital Purchases on the Activity Statement

Once the bill is in and the tax rate is right, the verification step in Xero is Accounting → Reports → Activity Statement. Open the BAS for the relevant period and read the labels.

For a Simpler BAS file, the only labels that will be lodged are G1, 1A, and 1B. The figure to check is 1B — the total GST element across all purchases in the period, including the GST on every capital purchase coded GST on Expenses. Reconcile 1B against your expected GST credit for the quarter: take the GST-inclusive total of all deductible purchases, divide by 11, and the result should sit close to 1B. Discrepancies usually mean a transaction has been coded BAS Excluded when it should have been GST on Expenses, or vice versa.

For a Full BAS file (or a Simpler BAS file where GST on Capital has been restored for internal reporting), three labels matter on the purchases side. G10 should reflect the GST-inclusive total of capital purchases for the period. G11 should reflect the GST-inclusive total of non-capital purchases. 1B should reflect the combined GST element across both. The arithmetic check is the same: divide the sum of G10 and G11 by 11 and the result should approximate 1B.

There is one display behaviour that catches reviewers off guard. A Simpler BAS file may still show G10 and G11 figures in the Activity Statement report view on screen, because Xero calculates the values internally using the tax-rate mapping regardless of whether they will be lodged. That is what the report displays — not what gets lodged. The Simpler BAS lodgement file submitted to the ATO contains only G1, 1A, and 1B, and the ATO never sees G10. A reviewer seeing G10 populated on a Simpler BAS report is not looking at a lodgement error; they are looking at Xero's internal calculation for the period.

Where a figure looks wrong, every line on the Activity Statement is drillable. Click into the label, and Xero displays the transactions that contributed to it. If a capital purchase is missing from G10 on a Full BAS file, the drill-down will not show it — which is the diagnostic moment: open the transaction directly and check the tax rate on the line against the mapping in section 3. The fix is almost always a coding correction on the source transaction rather than anything to do with the report itself.

Three Mistakes That Break G10 or 1B in Xero

Three failure modes account for almost every G10 or 1B figure that doesn't reconcile. When something looks wrong on the Activity Statement, work through them in this order.

Creating a custom GST on Capital rate. Transactions coded against a user-created tax rate — even one named identically to the built-in — do not appear in G10, because only Xero's built-in rates drive BAS label reporting. Restore the built-in rate and recode the affected transactions per the restore path in section 6.

Reporting G10 as net-of-GST. G10 is GST-inclusive, and the most common error on the label is to net it down out of habit from P&L and income-tax reporting. A $55,000 vehicle purchase belongs in G10 at $55,000, not at $50,000, with the $5,000 GST element appearing separately in 1B. The fix is to confirm G10 reflects the gross amount paid; if the figure on the Activity Statement already looks net, drill into the label and check whether a transaction has been entered net of GST without the tax line, which Xero will report as the net figure.

Populating G10 on a Simpler BAS lodgement. Simpler BAS submissions must not include values for G2, G3, G10, or G11. The ATO rejects the lodgement with error code CMN.ATO.AS.EM200, with the message "For simpler BAS lodgement labels G2 or G3 or G10 or G11 must not be provided." If the file is on Simpler BAS, code all capital purchases GST on Expenses and lodge with G1, 1A, and 1B only. If the file is genuinely on Full BAS and the lodgement still fails this way, the issue is the lodgement profile in Xero (or in the registered agent's lodgement software) reporting as Simpler BAS — the transactions themselves are fine; the profile needs to match the lodger's actual GST reporting method.

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Reviewing a Quarter of Supplier Invoices Before They Hit Xero

The mechanics above answer the coding question one transaction at a time. The real bottleneck at BAS time is volume — a quarter's worth of supplier PDFs that need to be opened, read, classified as capital or operating, and posted to Xero with the right tax rate. Opening each PDF in turn to read supplier, date, GST-inclusive total, GST amount, and to make the capital-vs-operating call is the slow part. At a quarter's volume it is the slowest part of BAS prep — not the coding judgement itself, but the navigation around it.

Pulling the batch into a single structured spreadsheet first changes the shape of the work. One row per invoice, columns for supplier, invoice date, GST-inclusive total, GST amount, and a capital-vs-operating classification hint, and the bookkeeper can scan the whole quarter in a single view rather than clicking through every PDF in turn. Borderline calls still need human judgement — a $1,200 ergonomic chair sits awkwardly between capital and operating, a year-one software subscription is not the same as a perpetual licence — but the spreadsheet makes the judgement scalable. By the time the data is back in front of Xero, the classification work has been done in a view designed for scanning, and the Xero entry becomes mechanical.

That extraction is the job our product does: extract supplier invoices into a structured spreadsheet before coding them in Xero by uploading the PDFs and describing the columns you want in plain English. The same prompt handles a quarter of ten invoices and a quarter of a thousand, with mixed-format batches up to 6,000 files in a single job.

Two adjacent workflows are worth noting for readers whose review extends past pure BAS classification. Building an instant asset write-off register from a year of supplier invoices covers how to extract the capital-purchase line items into the form required for the small-business write-off claim, which uses the same supplier-invoice batch as input. Converting PDF supplier invoices into Xero bills at scale covers the ingestion step that follows classification — turning the reviewed and classified batch into draft bills in Xero rather than entering them by hand.