In Xero, capital purchases with GST appear at label G10 on your BAS when you use the “GST on Capital” tax code. The GST component of those purchases flows to label 1B. If your capital purchases are showing up at G11 instead, or not appearing on the BAS at all, the tax code on the bill is wrong.
Most of the confusion around G10 comes from two things: not knowing which Xero tax code maps to which BAS label, and not understanding the difference between capital and non-capital purchases for BAS purposes. This guide covers both.
What is G10 on the BAS?
G10 is the “Capital purchases” label on the Australian Business Activity Statement. It captures the total GST-inclusive value of capital asset acquisitions your business made during the reporting period.
Capital purchases are assets you acquire for long-term use in the business. Equipment, vehicles, machinery, computer hardware, office fitouts, furniture and fixtures all qualify. The defining characteristic is that the asset has a useful life beyond the current reporting period and is used to generate income over time.
The GST portion of capital purchases at G10 is included in label 1B, which is the total GST on all purchases (both capital and non-capital). So if you buy a $55,000 excavator including GST, the full $55,000 appears at G10, and the $5,000 GST is part of the 1B total.
G10 sits alongside G11 (non-capital purchases) on the BAS. Together, G10 and G11 represent all your GST-inclusive purchases for the period. The ATO requires this split for statistical tracking and compliance analysis. Getting the split wrong does not change your total GST claim, but it does misstate your BAS, and a pattern of incorrect reporting can trigger ATO review.
Which Xero tax code maps to G10?
The tax code you need is GST on Capital.
Depending on your Xero organisation’s region settings, it may display as “GST on Capital” or “Capital - GST on Capital Purchases”. Both refer to the same code and both map to G10 on the BAS.
Here is how to apply it step by step:
- Open the bill in Xero (Purchases > Bills to Pay > New Bill, or enter from the supplier invoice).
- Add the line item for the capital purchase. Enter the description and amount.
- Select the account - this should be a fixed asset account from your chart of accounts (for example, “Plant and Equipment” or “Motor Vehicles”).
- Set the tax code to “GST on Capital” using the tax rate dropdown on the line item.
- Approve the bill. Xero records the net amount to the asset account, the GST to the GST control account, and tags the transaction for G10 reporting.
When the BAS is generated, Xero reads the tax code on each transaction to determine which BAS label it belongs to. Transactions coded with “GST on Capital” go to G10. Transactions coded with “GST on Expenses” go to G11. The mapping is automatic once the correct code is applied.
If you enter the amount as GST-inclusive (for example, $55,000), Xero calculates the GST ($5,000) and records the net ($50,000) to the asset account. If you enter it as GST-exclusive ($50,000), Xero adds the GST on top. Either way, the full $55,000 (inclusive) is what appears at G10.
When to use GST on Capital vs GST on Expenses
The distinction between these two tax codes controls where your purchase appears on the BAS. Getting it wrong does not affect your GST refund or liability, but it does create an inaccurate BAS.
Use GST on Capital for:
- Plant and equipment purchases
- Motor vehicles and trailers
- Computer hardware and servers (above your capitalisation threshold)
- Office fitouts and leasehold improvements
- Furniture and fixtures
- Machinery and tools with a useful life beyond one year
Use GST on Expenses for:
- Rent and lease payments
- Utilities (electricity, gas, water)
- Office supplies and consumables
- Fuel and maintenance
- Professional services (accounting, legal)
- Software subscriptions (unless capitalised)
- Any purchase below your capitalisation threshold
The key question: is this an asset that will be used in the business for more than one reporting period, or is it consumed in the current period? Assets go to GST on Capital. Operating costs go to GST on Expenses.
Most businesses set a capitalisation threshold - typically between $1,000 and $5,000. Purchases below the threshold are expensed regardless of their nature. A $300 keyboard is an expense even though it is technically equipment. A $15,000 server is a capital purchase. Your accountant or finance team sets the threshold based on your business size and the materiality of the amounts involved.
For industrial businesses processing high-value asset purchases - construction companies buying heavy equipment, manufacturers acquiring production machinery, logistics operators purchasing fleet vehicles - the stakes are higher because the dollar amounts are larger. A $200,000 crane coded to G11 instead of G10 creates a material misstatement on the BAS. Automated line-item coding can catch these miscodings before the bill is posted.
Worked example
A construction business purchases a new excavator for $55,000 including GST.
| Detail | Amount |
|---|---|
| GST-inclusive price | $55,000 |
| GST component (1/11th) | $5,000 |
| Net (ex-GST) amount | $50,000 |
In Xero:
- The bill is entered with a single line item for the excavator.
- Account: “Plant and Equipment” (a fixed asset account).
- Tax code: “GST on Capital”.
- Xero records $50,000 to Plant and Equipment and $5,000 to the GST control account.
On the BAS:
| BAS Label | Description | Amount |
|---|---|---|
| G10 | Capital purchases | $55,000 |
| 1B | GST on purchases (includes this $5,000) | $5,000+ |
The $5,000 GST is included in the 1B total alongside GST from all other purchases. G10 shows the full GST-inclusive amount of $55,000.
What if the wrong tax code was used?
If the bookkeeper had selected “GST on Expenses” instead of “GST on Capital”, the same $55,000 would appear at G11 (non-capital purchases) instead of G10. The 1B figure would still be correct because both tax codes contribute GST to 1B. But the G10/G11 split would be wrong.
This is why the tax code matters even though the GST credit itself is unaffected. The ATO uses the G10/G11 split to assess industry benchmarks and flag businesses whose capital purchase patterns look unusual relative to their turnover. A construction business reporting zero at G10 over multiple quarters while claiming large GST credits would look anomalous.
Common mistakes
These are the errors that show up repeatedly when businesses process capital purchases in Xero.
Using GST on Expenses for capital items
This is the most frequent mistake. The bookkeeper selects “GST on Expenses” because it is the default or most commonly used tax code. The GST credit is still claimed correctly, but the purchase appears at G11 instead of G10. Over multiple quarters, this understates capital purchases and overstates operating purchases on the BAS.
Using BAS Excluded for items that should be on the BAS
Some businesses code capital purchases as “BAS Excluded” because they are unsure which tax code to use. This removes the purchase from the BAS entirely - no GST credit is claimed, and the purchase does not appear at G10 or G11. The business loses the input tax credit, which on a $55,000 purchase means forfeiting $5,000.
This error is particularly common with imported capital goods, where the import GST treatment is handled differently from domestic purchases and staff are unsure which code applies.
Coding the full GST-inclusive amount to the asset account
When entering a bill, Xero expects either the GST-inclusive amount (with Xero calculating the split) or the GST-exclusive amount (with Xero adding GST on top). Some users manually enter the full $55,000 to the asset account and then separately enter $5,000 as a GST adjustment. This creates double counting or incorrect asset values.
Let Xero handle the split. Enter the amount, select the tax code, and Xero calculates the GST component automatically. The asset account receives the net amount and the GST control account receives the GST.
Not reviewing the BAS before lodging
The BAS report in Xero is a draft until you finalise it. Running it and reviewing the figures - particularly drilling into G10 and G11 - catches coding errors before they reach the ATO. Skipping this review means any tax code mistakes flow straight into the lodged return.
BAS preparation errors are almost always the result of coding decisions made weeks or months earlier. The review step is your last opportunity to catch them.
How to check your G10 figure before lodging
Before finalising and lodging your BAS in Xero, run through this process to verify that G10 is correct.
Step 1: Open the Activity Statement report. In Xero, go to Accounting > Reports > Activity Statement (or BAS, depending on your Xero version). Select the reporting period.
Step 2: Find the G10 line. Look for “Capital purchases” or label G10 in the report. Note the total figure.
Step 3: Drill into the G10 amount. Click the G10 figure to see the list of transactions that make up the total. Each transaction should be a genuine capital purchase - an asset coded to a fixed asset account with the “GST on Capital” tax code.
Step 4: Review each transaction. Check that every transaction in the G10 drill-down is actually a capital purchase. Look for:
- Items that should be expenses (supplies, maintenance, consumables) incorrectly coded as capital
- Items below your capitalisation threshold that should be at G11
- Duplicate transactions from bills entered twice
Step 5: Recode any incorrect transactions. If you find a transaction that does not belong at G10, go back to the original bill and change the tax code from “GST on Capital” to “GST on Expenses” (or vice versa). The BAS report updates automatically when you re-run it.
Step 6: Cross-check against your fixed asset register. The total at G10 should roughly align with the capital additions recorded in your fixed asset register for the period. If G10 is significantly higher or lower than expected asset additions, investigate the difference.
You can use a BAS worksheet to track expected figures before running the report in Xero. For verifying GST calculations on individual purchases, a GST calculator confirms the 1/11th split. And if you need to check the depreciation treatment of a newly purchased asset, a depreciation calculator can help you plan the write-off schedule alongside the BAS coding.
Getting the coding right at the source
The pattern behind most G10 errors is the same pattern behind most BAS errors: the wrong decision was made when the bill was entered, and nobody caught it before lodgement. For businesses processing dozens of supplier invoices each week - particularly in construction, manufacturing, and logistics where capital purchases are frequent and high-value - manual tax code selection introduces risk at every invoice.
AP automation addresses this by applying tax codes based on supplier history and account mapping rules. When a bill from a known equipment supplier is coded to a fixed asset account, the system applies “GST on Capital” automatically rather than relying on the person entering the bill to remember the distinction between G10 and G11. The coding decision is made once, validated, and applied consistently across every subsequent invoice.
The result is a BAS where G10 reflects actual capital purchases, G11 reflects actual operating purchases, and 1B includes the correct GST from both. No last-minute reclassifications. No quarterly scramble to figure out why the numbers look wrong.
Pulsify automates invoice coding for Xero and MYOB, including GST tax code selection for capital and non-capital purchases. If your team is manually selecting tax codes on every bill, see how Pulsify handles it.
Sources: ATO Activity Statements · ATO GST Reporting and BAS Lodgement · ATO GST and Property
Further reading: BAS Preparation: AP GST Coding Errors · Automated Line-Item Coding for Mixed GST Split Invoices · Import GST and Customs Duties: AP Coding Australia