New to the world of business finances? The Australian tax code can be difficult to understand for anyone who’s unfamiliar with its many facets, but it’s important that every business owner has at least a basic understanding of things like BAS, GST, and other essential elements of it.
If you’re scratching your head and unsure of where to start, this guide will help you figure things out once and for all.
GST stands for the “Goods and Services Tax.” This is a type of value-added tax that applies to most goods and services that are sold for consumption on a domestic scale. Consumers are the ones that pay GST, but businesses selling the goods and services remit it to the government. So, in effect, GST helps generate revenue for the government.
The GST is included within the final price tag of goods consumers purchase, meaning it’s paid at the point of sale. The seller of those goods then passes the GST revenue onto the government. This means it’s an indirect consumption tax, but it only applies to certain goods and services.
In general, the GST system helps to simplify things by removing state based consumption taxes like sales tax, service tax, and excise duty tax, and collect it as a single tax, known collectively as GST. The GST is collected by the federal government and then distributed to the states.
Any business registered for GST will need to lodge a Business Activity Statement, or BAS. This form will help the business pay their GST, PAYG installments, PAYG withholding tax, and other taxes. When a business registers for their ABN and GST, they will automatically receive a BAS when it’s time to file.
A BAS is a form that reports the amount you need to pay the ATO. The formula is GST collected on sales, less GST paid on purchases, plus tax withheld on wages (pay as you go withholding) to employees and plus an income tax instalment (pay as you go instalment).
When it’s time to lodge a BAS for your business, it’s important that you have all the right numbers readily available. That’s why the Australian Tax Office recommends keeping a full record of all sales, fees, expenses, wages, and other costs associated with your business. You’ll also want to keep other appropriate records, including log books and stocktake records. Many businesses use a bookkeeping service like ours us to do this for them as they’re too busy running their business, or don’t want the risk of getting something wrong. Outsourcing your bookkeeping function is one of the first thing a small and medium business should consider when trying to scale
In your BAS you will need to know the sales for the period, the GST collected, the GST you paid on expenses, wages paid to staff and the tax withheld from wages (PAYG Withholding). If you’re in the PAYG Instalment system, this field will already be completed.
Remember that you can only claim the business portion of any GST on purchases. Also, you cannot claim GST credits for private expenses like entertainment or food. If an item you buy is for both business and personal use, you can only claim the business portion.
When it comes to lodging and paying your BAS, the due date for paper lodgements will be shown on your form. But if you lodge electronically, you have different BAS due dates. If the due date falls on a public holiday, Saturday, or Sunday, you will have until the following business day to lodge and pay the BAS.
Your reporting and payment cycle for GST will be one of the following:
- Monthly: If you have a turnover in GST of $20 million or more (or you choose to go monthly)
- Quarterly: If you have a turnover in GST of $20 million or less
- Annually: If you are voluntary registering for GST and the turnover in GST is less than $75,000 (or less than $150,000 for non-profits). I really don’t recommend this option. Most people spend the GST in this time and don’t have the cash to pay it when it comes due.
Natural disasters can change BAS due dates and, in other situations where extenuating circumstances arise, a BAS agent can help you with determining your due date and filing requirements.
When completing your BAS, be sure to enter whole dollar amounts. Do not round up to the next dollar, just leave out any cents. Enter each invoice only once. If you use cash accounting for GST, your sales and expenses must be within the same period you received payment.
When it comes to filling out a BAS, many businesses get confused because of all the fields. If a field does not apply to you, do not fill it out, just enter zero where you have nothing to report.
If you are manually completing your BAS, be sure to double check all calculations and figures. Remember, you can also go back and correct mistakes on earlier BAS.
I’d highly recommend using accounting software like Xero to make life easy, or get a tax agent (like us) or a BAS agent to complete these for you. We regularly bundle our accounting and tax services with our bookkeeping service that not only provides cost savings for our clients, but gives them the up to date financial data they need to make informed decisions about their business.
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How To Lodge Your Business Activity Statement
Remember that the due date for lodging and paying your BAS is on the form but depends on whether you lodge electronically. Failing to lodge and pay on time will result in penalties and can make you personally liable to pay the tax office – regardless of the corporate structure you have.
If, for any reason, you think you might miss the due date given, contact a BAS agent as soon as possible and alternate arrangements may be made for you. Be sure that you use the correct PRN (Payment Reference Number), or EFT code, when you submit your payment.
When it comes to your lodgment options, you can do it online using the Business Portal and sole traders can also go through myGov. If you use an accounting, payroll, or financial software that integrates with SBR-enabled software (like Xero), you can file directly from that software portal.
Additionally, you can choose to lodge through your tax agent or BAS agent. They can lodge, and vary, things quickly and cost effectively. We help many businesses complete and lodge BAS so they don’t have to worry about it. For just a small investment, it’s a huge relief to them knowing not only that it’s completed, but is done right, ensuring they are only paying the right amount to the tax office.
The last option is to lodge your BAS by mail. You can request a paper BAS and pre-addressed envelope by calling 13 28 66. But just remember paper lodged BAS have earlier due dates, so apart from being an inefficient way of doing things, it also means paying the ATO earlier – which can put a dent in your cash flow cycle.
So if doing your own bookkeeping and BAS seems like to much hassle or risk, contact us to get a fixed price quote on bundling this with your accounting and taxes.