How to Prepare Your BAS Statement The Right Way

As a business owner or operator in Australia, one of the most crucial compliance obligations you’ll encounter is the Business Activity Statements (BAS). This document, lodged with the Australian Taxation Office (ATO), is a comprehensive report of your business’s tax liabilities and entitlements. 

Whether you’re a sole trader, partnership, company, or trust, understanding and properly managing your BAS is essential for maintaining good standing with the ATO and avoiding costly penalties.

The BAS is more than just a tax form; it’s a window into your business finances and a tool for managing your cash flow. 

Failing to lodge your BAS on time or providing inaccurate information can have severe consequences, including interest charges, penalties, and even prosecution in extreme cases.

In this blog, we’ll explore the basics of the BAS, including its purpose, reporting obligations, lodgement procedures, and strategies for maintaining compliance.

What is BAS and How Does it Work?

The Business Activity Statement (BAS) is a form used by the Australian Taxation Office (ATO) to collect and record various tax obligations from businesses. It serves as a centralised reporting system, allowing businesses to report and pay multiple tax liabilities in a single document.

Any business that meets the following criteria is required to lodge a BAS:

• Has a Goods and Services Tax (GST) registration
• Pays salary or wages to employees
• Makes income tax instalments
• Is registered for other taxes like Fringe Benefits Tax (FBT) or Wine Equalisation Tax (WET)

The BAS can be lodged on a monthly, quarterly, or annual basis, depending on your business’s turnover and reporting cycle preferences. Most businesses opt for quarterly BAS reporting, but those with an annual GST turnover of $20 million or more must report monthly.

There are two main types of activity statements:

• BAS: The standard form used by most businesses to report and pay GST, Pay As You Go (PAYG) withholding, and other tax obligations.
• Instalment Activity Statement (IAS): An IAS is a simpler form that only includes PAYG income tax instalments. It does not include GST or other taxes. 

BAS Reporting Obligations

The following list contains key items that you must include in your BAS. 

Goods and Services Tax (GST)

If your business is registered for GST, you must report the total sales you’ve made and the GST you’ve collected from customers (GST on sales). You also need to report the total amount of GST credits you can claim on business purchases and expenses (GST on purchases).

Pay As You Go (PAYG) Withholding

Businesses that pay salary, wages, or other payments to employees or contractors must withhold amounts from these payments and report them on the BAS. This includes PAYG withholding amounts for salaries/wages, allowances, bonuses, commissions, etc.

PAYG Instalments

Businesses may need to pay instalments towards their expected income tax liability for the year. These PAYG instalments get reported on the BAS.

Other Taxes

Depending on your business activities, you may also need to report other taxes, like:

• • Wine Equalisation Tax (WET): WET is a tax applied to certain wine products in Australia. It is levied at 29% of the wholesale selling price of wine packaged for retail sale.
  • Luxury Car Tax: The Luxury Car Tax is a 33% tax imposed on cars with a value (including GST) above a set threshold in Australia.  It applies only to the portion of the car’s value that exceeds the threshold, not the total value.
  • Fuel Tax Credits: Fuel Tax Credits provide a credit for the fuel tax (excise or customs duty) included in the price of fuel used in machinery, plant, equipment, and heavy vehicles for business activities. 

How Do You Lodge a BAS?

Once you’ve gathered all the necessary information and calculated the amounts owed, it’s time to lodge your BA  with the ATO. There are several options available for lodging your BAS:

• Online through ATO online services:  This is the most convenient and recommended method. You can lodge your BAS directly through the ATO’s online services portal using your myGov account or the Business Portal. 
• Through tax or BAS agent: If you use a registered tax or BAS agent, they can lodge your BAS on your behalf using the ATO’s online services or practitioner lodgment service.
• Paper BAS form:  While not recommended due to processing delays, you can still lodge a paper BAS form by mailing it to the ATO. The paper forms can be ordered through the ATO.

Ensure that you are aware of lodgement due dates, which vary depending on your reporting cycle (monthly, quarterly, or annually) and the quarters/months involved. 

Generally, quarterly BAS are due on the 28th day of the month following the end of the quarter:

 

Quarter	Due date
1. July, August and September	28 October
2. October, November and December	28 February
3. January, February and March	28 April
4. April, May and June	28 July

Monthly BAS are due on the 21st of the following month. For example, a July monthly BAS is due on August 21.

Payment of any amounts owed must also be made by the lodgement due date to avoid interest charges from the ATO. Electronic funds transfers and BPAY are the preferred payment methods.

Failing to lodge your BAS on time can result in penalties and interest charges. The ATO imposes a penalty for every 28 days that your BAS is overdue, up to a maximum cap. I

Tips on Managing Your BAS Compliance

The following are some tips for effectively managing your BAS compliance:

Keep Accurate Records

Meticulous record-keeping is the foundation of accurate BAS reporting. Ensure you have a system in place to track all sales, purchases, payments to employees/contractors, and other relevant transactions. Consider using accounting software or engaging a bookkeeper to streamline this process.

Set Reminders

Mark your BAS lodgement due dates on your calendar and set reminders well in advance. This will give you ample time to gather the necessary information and complete the BAS without rushing.

Understand Your Obligations

Take the time to thoroughly understand your BAS reporting obligations. Review the ATO’s guidelines and seek professional advice if you’re unsure about any aspect of the BAS. Ignorance of the rules is not an acceptable excuse for non-compliance.

Reconcile Regularly

Regularly reconcile your business accounts and transactions to ensure accuracy and identify any discrepancies early on. This will make the BAS preparation process smoother and reduce the risk of errors.

Consider Professional Assistance

If you find the BAS process overwhelming or time-consuming, consider engaging the services of a registered tax agent or BAS agent. They can handle the lodgement process on your behalf, ensuring compliance and freeing up your time to focus on running your business.

Stay Up-to-Date

Tax laws and regulations can change over time, so it’s essential to stay informed about any updates or amendments that may affect your BAS reporting obligations. Subscribe to ATO updates or consult with your tax professional regularly.

Common BAS Mistakes and How to Avoid Them

Even the most diligent business owners can make mistakes when it comes to completing their BAS. However, these errors can lead to costly penalties, interest charges, and potential audits from the ATO. To help you avoid common pitfalls, here are some of the most frequent BAS mistakes and tips for preventing them:

• Incorrect calculations: One of the most common BAS errors is miscalculating the amounts owed or claimed. Double-check your calculations, especially when it comes to GST on sales and purchases, PAYG withholding, and any other tax liabilities or credits.
• Transposition errors: Transposition errors occur when numbers are accidentally transposed or entered incorrectly on the BAS form. Always double-check your entries, and consider having someone else review your BAS before lodging it.
• Failing to report all income: Ensure you’re reporting all taxable income, including cash transactions, on your BAS. Omitting income can lead to penalties and potential audits from the ATO.
• Claiming incorrect GST credits: Only claim GST credits for business-related purchases and expenses for which you have valid tax invoices. Claiming personal or non-business expenses can result in penalties.
• Missing lodgement deadlines: Late lodgement of your BAS can result in penalties and interest charges from the ATO. Stay on top of your lodgement due dates and set reminders to ensure timely submission.
• Inadequate record-keeping: Failing to keep accurate and complete records of your business transactions can make it challenging to complete your BAS correctly. Implement a robust record-keeping system to track all sales, purchases, and payments.

To avoid these common mistakes, consider the following strategies:

• Use accounting software or engage a bookkeeper to help manage your financial records and BAS preparation.
• Double-check all calculations and entries before lodging your BAS.
• Seek professional advice from a registered tax agent or BAS agent if you’re unsure about any aspect of the BAS process.
• Stay up-to-date with any changes to tax laws or BAS requirements by regularly reviewing ATO guidance.

Key Takeaways

• The BAS is a form used by the ATO to collect various tax obligations from businesses.
• Know what information needs to be reported on your BAS, including GST, PAYG withholding, income tax instalments, and any other applicable taxes.
• Accurate reporting is crucial for compliance.
• Keep records, set reminders for lodgement due dates, and pay any amounts owed by the deadlines to avoid penalties and interest charges from the ATO.
• If you find the BAS process overwhelming or are unsure about any aspect, don’t hesitate to engage the services of a registered tax agent or BAS agent for guidance and support

FAQs

Is BAS the Same as Income Tax Return?

No, the BAS is not the same as an income tax return. While both involve reporting income and paying taxes, they serve different purposes and have distinct requirements.

The BAS is a form used by the ATO to collect and record various tax obligations from businesses. On the other hand, the income tax return is an annual document used to report a business’s overall income, deductions, and tax liabilities for a financial year. 

Do I Need to Submit BAS as Sole Trader?

Yes, you do pay taxes with the BAS as a sole trader or any other business structure in Australia. The BAS is used to pay GST collected from customers, PAYG withholding amounts for employees, PAYG instalments towards your expected income tax liability, and any other applicable taxes like Wine Equalisation Tax or Luxury Car Tax. Failing to pay the amounts owed on your BAS by the due date can result in penalties and interest charges from the ATO.

Do You Pay Tax With BAS?

Yes, you do pay taxes with the BAS as a sole trader or any other business structure in Australia. The BAS is used to pay GST collected from customers, PAYG withholding amounts for employees, PAYG instalments towards your expected income tax liability, and any other applicable taxes like Wine Equalisation Tax or Luxury Car Tax.  

Disclaimer

Please note that every effort has been made to ensure that the information provided in this guide is accurate. You should note, however, that the information is intended as a guide only, providing an overview of general information available to property buyers and investors. This guide is not intended to be an exhaustive source of information and should not be seen to constitute legal, tax or investment advice. You should, where necessary, seek your own advice for any legal, tax or investment issues raised in your affairs.