Business Activity Statement(BAS) For Small Businesses Explained: A Full Guide

When starting a business, one of the first choices you'll need to make is whether or not to register for the Goods and Services Tax (GST). This choice will significantly affect how you handle the administrative side of your finances. If you decide to register for the Goods and Services Tax (GST), you must provide the Australian Taxation Office with a quarterly Business Activity Statement (BAS). This article will walk you through all you need to know about a Business Activity Statement (BAS), how to file one, and why doing so is required.

What is BAS?

The Business Activity Statement (BAS) is a form that, depending on the size of your company, must be submitted anywhere from one to twelve times per year. The ATO will determine your GST refund or bill based on the information provided on your BAS. In addition to that, it is utilised for employee income tax, fringe benefits tax, luxury automobile tax, wine equalisation tax, and gasoline tax credits (if you are in the pay-as-you-go system).

What is GST?

GST means Goods and Services Tax, a value-added tax levied on the vast majority of products and services sold in the domestic market. Consumers are responsible for paying the GST, while businesses that sell the products and services are responsible for remitting them to the government. In this sense, the Goods and Services Tax (GST) contributes to generating revenue for the government.

Types of taxes to be paid through BAS

There are different taxes you can pay through BAS. They are as follows:

1. GST

The goods and services in most categories are subject to a value-added tax of ten percent. You can report, record, and pay the goods and services tax (GST) that your company has collected using your BAS. You can also use it to claim GST credits. After fulfilling the necessary standards, your company can submit a claim for GST credits at any point throughout the subsequent four years. In the Goods and Services Tax (GST) context, a 'tax period' refers to one month or three months. However, the BAS form is required for all tax payments, including PAYG and fringe benefits tax.

2. PAYG

To qualify for PAYG instalments, you must make regular payments toward the income tax you anticipate owing at the end of the year. You can select either a certain instalment amount or a specific instalment rate. The ATO uses the information you provided in your most recent tax return to calculate an amount that will be owed as an instalment. The instalment rate is calculated by the company using the instalment rate provided by the ATO and based on the actual income as the company earns it. In most cases, the ATO will not send a BAS for a PAYG payment but rather a separate notice called an instalment notice.

3. FBT

A tax distinct from income tax is the fringe benefits tax (FBT). This tax is levied on specific perks that firms provide to their workers, including the workers' families and any other associates of the workers. These benefits may include allowing employees to use their personal vehicles for work-related errands or paying for an employee's subscription to a local fitness centre. If a company was obliged to pay FBT of more than $3,000 in the previous fiscal year, they must report this information in their BAS and pay this amount quarterly.

4. Luxury Car Tax(LCT)

The luxury car tax, often known as the LCT, applies to any sale or import of a luxury vehicle with a value greater than the LCT threshold and includes the value of any applicable goods and services tax. The ATO determines this level and is subject to change at any time. The LCT now stands at 33% and applies to the portion of the car's value above the threshold. It does not apply to the total value of the vehicle. If you meet the precise criteria set by the ATO, you may be allowed to postpone the payment of LCT in certain situations when it is applicable.

5. WET

WET is a tax calculated based on the price of wine and levied only on wine producers, distributors, and importers. The WET now sits at 29% of the taxable value of wine. If you file your GST return and make your GST payment once per year, you are exempt from the requirement to report WET on a monthly or quarterly BAS. On the other hand, you are required to disclose WET on your annual return for GST.

6. FTC 

Fuel tax credits allow businesses to receive a credit for the fuel tax (also known as excise tax or customs duty) included in the fuel used in heavy vehicles, plant equipment, and machinery used for business purposes. The FTC rates are subject to change at varying intervals. When a company wants to submit a claim like this, it should always check with the ATO to see the current rates first because doing so is mandatory. 

How does BAS work?

Sometimes, you don’t understand how BAS works, you just find a way to get it submitted periodically. We know a form must be submitted to the ATO to pay your business taxes, but how does the process work? The Business Activity Statement form is the one that your company will utilise to report on your taxable sales, taxable purchases, and other tax responsibilities, including GST and PAYG withholding.  The ATO will then use this information to compute the amount of tax your company is required to pay, and the company is responsible for making any tax payments due by the specified date.

How does GST work?

At this time, the GST rate is 10%. This means that if the price of your goods or services is $100, the consumer will be charged $110 for them. The additional ten dollars represents the ATO value-added tax (GST). When you make purchases of supplies for your company, you will be required to pay a Goods and Services Tax (GST) of ten percent, which is then refundable in the form of a tax credit. After each GST period – often quarterly but occasionally monthly – you must account for the GST you have received on your sales minus any that you have paid (the credits) on your purchases.

The difference is the amount that needs to be paid (or maybe refunded if credits on purchases exceed debits on sales). You can accomplish this by submitting an activity statement for your firm and paying the net amount of GST to the ATO. Businesses with less than $75,000 annual revenue can register for the goods and services tax (GST). This is so that businesses can choose whether or not they want to be eligible to collect input tax credits on suppliers' purchases. This is especially true if the total amount of GST credits on purchases is more than the total amount charged to customers.

How often do you lodge a BAS?

Regarding lodging and paying your BAS, the due date for paper lodgements will be displayed on your form. This includes the date by which you must pay your BAS. If you use online services business methods, however, the due date for your BAS will be different. If the BAS due date falls on a weekend, public holiday, or Sunday, you will have until the first working day after the due date to register the BAS and make the payment. 

Your GST reporting and payment cycle will be one of the following, depending on which option you choose:

• Monthly: If your turnover in GST is more than $20 million (or if you prefer to report it monthly), you are required to submit monthly GST reports.
• Quarterly: If your annual GST revenue is less than $20 million, you are exempt from this requirement.
• Yearly: If you voluntarily register for GST and your annual turnover in GST is less than $75,000 (or less than $150,000 if you are a non-profit organisation), you are not required to pay the GST registration fee.  Most people spend their GST during this time, so they do not have the cash to pay it when it is due. 

It is possible for natural disasters to alter the dates on which the BAS is due. In any other situation with extenuating circumstances, a BAS agent can assist you in identifying your due date and the necessary filing procedures.

4 Ways to Prepare Your BAS

The first time you prepare your BAS can be time-consuming. Make sure you do your BAS correctly by following these steps.

1. Know your GST reporting and payment dates  

To complete their GST returns, all businesses registered for GST will use the business activity statement. Your business activity statement will specify whether your GST reporting and payment cycle is monthly, quarterly, or annually.

2. Choose either accrual or non-accrual

When you sign up for the GST, you must choose whether to record your transactions on an accrual basis or a cash basis. If you choose to report your GST using the accruals basis, you must do so when you either generate your sales invoice or receive your expense invoice. This is the case regardless of whether or not you have received or made a payment for the invoice.

When using a cash basis, also known as a non-accrual basis, you report your Goods and Services Tax (GST) based on when cash is received or paid out, regardless of when the transaction took place.

3. Reconcile and complete your BAS form

You can determine the amount of GST you owe (or are owed) for the applicable reporting period by running an Activity Statement from your software or manually adding up all of the data. This will offer you guidance to your obligations and allow you or your accountant a starting point from which to verify your accounting file.

4. Lodge

If you are okay with the data from your accounting system, you can send the completed form to the ATO by email or electronically through the ATO portal if you are using electronic filing. You can email the software file to your agent or accountant, who will double-check your data and submit your BAS. If you are using an agent or accountant, this allows you to save time. They might alter the numbers compared to the prior reporting period, fix any errors, and add any extra data that might be lacking. Be sure to make your payments on time or notify the ATO of the schedule you intend to use for payments.

How can you lodge your BAS?

When it comes to submitting their activity statements, business owners have different options to choose from. Most companies submit their own BAS online, giving them two weeks to submit and pay for it.

1. Online platform 

The MyGov platform allows sole proprietors and individuals to lodge, view, and change their activity statements. After logging in at www.my.gov.au, pick 'tax' and 'activity statements' from the drop-down menus that appear.

2. ATO portal

If you are not an individual taxpayer or a sole proprietor, you can manage the tax responsibilities of your business through the ATO's Business Portal.

3. Software for online accounting

If you use online accounting software like Xero or MYOB, you can submit your BAS return immediately through the software's accounting portal. To use it for BAS lodgement, your accounting software must have the Standard Business Reporting (SBR) feature enabled.

4 Ways You Can Calculate Your BAS

There are several ways you can calculate your Bas, and they are below:

1. Calculate and report the GST every three months

This is available to all businesses quarterly. You must compute and report all GST labels in your business activity statement and make accurate GST payments quarterly.

2. Calculate the GST once every three months and report it once a year

Accessible to any and all companies whose annual revenue does not exceed $20 million. You are responsible for calculating and paying the exact amounts of GST quarterly, but you should disclose the total sales and the amount of GST collected and paid for each quarter.

3. Make quarterly payments of the GST amount and file annual reports

You can pay an ATO-determined GST instalment amount quarterly if your company has a turnover of less than $2 million. This option is available to all businesses. When choosing choices 2 and 3, a yearly GST reconciliation must be carried out and submitted to the ATO as part of the GST reporting process.

4. Income tax payments made on a pay-as-you-go (PAYG) basis

To qualify for PAYG instalments, you must make regular payments toward the income tax you anticipate owing at the end of the year. Before you submit your income tax return, you must finalise your PAYG instalments so that your income tax assessment considers the instalments you've paid throughout the year. This is necessary so that your income tax assessment is accurate.

5 Tips to make filing for BAS easy for you   

Lodging Bas periodically can be stressful for business owners because they have other aspects of their businesses to focus on. Here are tips to make it a seamless task for you.

1. Get your receipts and invoices organised

Maintaining meticulous records will be your most reliable ally when assembling your BAS. When it comes time to prepare your BAS, it is in your best interest to keep and organise all of the receipts and invoices related to your business as soon as you get a hold of them. Utilising accounting software can simplify and expedite this procedure significantly.

Keep your financial records up to date every week by entering all of the pertinent details of the transactions that your company has carried out. These records should include the date, the kind of transaction, the description, and the GST (if it applies). After the conclusion of the accounting period, you will need to tally up all of these records, fill out the BAS form, and submit it to the ATO. Keep records of your BAS lodgements for at least five years (and check to ensure they match those of your accounting systems).

2. Use accounting software

Investing in accounting software could save you significant time and effort. It is also beneficial for a company to retain correct records to file taxes; some systems even include the ability to file returns directly through the software.

Set aside some time weekly to review your financial situation. Accounting software that is worth its salt will be able to link with your company's financial systems, allowing it to record everything from debit card transactions to Internet payments. Because this information is already present, the only thing that needs to be done is to ensure that cash payments are included, that GST is entered correctly and that everything is associated with the appropriate categories for the BAS.

If you do this consistently, it will force you to think about cash flow and the financial side of the business while also keeping the process easy and uncomplicated for you. If you just organise your records when it's time to file your BAS, you'll end up with a mountain of work, and it'll be tough to recall which transactions belonged to which categories.

3. Know your BAS due date

You can submit your BAS either monthly, quarterly or annually. The rate at which your cash comes in will often determine the frequency of your check-in. You can avoid unpleasant interactions with the tax office by tracking when your BAS is due. Get in touch with the ATO well before the deadline for submitting your BAS if you have any reason to believe you won't be able to meet it.

4. Use a BAS agent

If you use a tax agent, you won't ever have to worry about missing a BAS deadline or facing penalties for filing your return late. Some of them will also be able to take care of your BAS, freeing up even more of your time.

They will be able to provide feedback on how well the business is running as well as suggestions on how to submit your GST accounts for review if they monitor the BAS of the firm on your behalf and maintain track of it. If you want even more knowledge on growing and managing your company, look for chartered accountants and business development consultants. They will be able to provide you with the most comprehensive advice.

5. Double-check

Before submitting your BAS, take a moment to double-check all figures and information. Ensure that every entry is accurate and matches your financial records. This step can help prevent errors, reduce the risk of penalties, and keep your financial records in impeccable order. It's a small effort that can make a significant difference in maintaining compliance and financial transparency.

4 Steps to prepare and lodge your BAS

Now it’s time to submit your Bas, how do you go about it? Here are steps you can follow in preparing and submitting your Bas. 

1. Prepare your information

First, you must reconcile your accounts to ensure all your information is correct and current. This entails carefully reviewing your financial records and ensuring that your bank statements reflect your accounting information. You must also ensure that all purchases and cash expenses are recorded, that all creditor information is precise, and that all outstanding monies are justified.

Gather any accounts with business transactions, receipts and invoices for those transactions, and receipts and invoices for any cash transactions for this stage. If you're using Xero, run the Bank Reconciliation Summary and look for exceptions in your general ledger.

2. Enter missing transactions

Using accounting software that connects directly to your business bank account, as Xero does, substantially simplifies and speeds up this procedure; nevertheless, doing it manually could take some time. You must record any missing transactions for which you have the corresponding receipts and invoices. You will need to have the date, the total amount of the transaction, the GST, and a description for each.

3. Total your records

After you have ensured that all of your information has been entered accurately, you have the option of either running an Activity Statement from your software or, if you are employing the manual technique, adding up all of the figures to establish the amount of GST that you are responsible for paying or that you are owed for the tax period. This is the part of the document where precision is of the utmost importance, so verify and check again to ensure the information is accurate!

In addition, you will need to calculate your PAYG, which refers to the amount of tax deducted from employees' wages. You will need to review your payroll and input the total amount of taxes deducted and the gross earnings for each employee. If you don't have any workers under your employ, just leave this area blank.

4. Update your records and lodge

After you finish the BAS, you should immediately update your records with the new information and make copies of any documentation pertinent to the process. Afterwards, you can mail a paper copy of the BAS form to the ATO, electronically submit it through the ATO portal, or have your agent do it for you. Be sure to pay what you owe on time or make payment arrangements with the ATO, whichever comes first!

These are the fundamental actions involved in putting together a BAS and submitting it to the ATO. Because it is such an essential component of your company, it is often a good idea to call in a professional, although it is not particularly difficult and recent advances in electronic systems, such as Xero, have simplified it. Best of luck!

Conclusion

Completing a BAS might be intimidating; however, this feeling can be avoided via prior preparation. There are key measures that must be taken to make the process run seamlessly, as well as ensure that there is sufficient cash in your business bank account. Getting help from a BAS agent like The Kalculators will make you stay out of trouble while lodging your BAS as a business owner. We also ensure you are not confronted with any unpleasant shocks when it comes time to file your BAS. Do not let the complexity of Bas lodgement scare you; let us handle it on your behalf.

Frequently asked questions

What are the fines for paying a BAS late?

If you do not lodge and pay your BAS by the due date, you may be subject to a penalty known as a failure to lodge (FTL) on time penalty. If you haven't submitted your activity statement, the ATO will give you a warning over the phone or in writing, and if you don't fix the problem, they will send you a penalty letter that includes the specifics of the penalty.

Can I lodge a BAS without an income?

Yes, you can lodge a BAS even if you haven't earned income. This might be the case for businesses still in their early stages or those that have incurred expenses but haven't started generating revenue yet. You indicate on the BAS that your income is zero in such situations.

Is it difficult to lodge my own BAS statement?

The difficulty of lodging a BAS statement depends on various factors, including the complexity of your business operations and your familiarity with accounting and tax principles. For straightforward businesses with simple transactions, lodging a BAS can be relatively straightforward. However, if your business involves complex financial transactions, international trade, or various tax obligations, seeking professional advice or using accounting software might be advisable.

Is a BAS statement a tax return?

No, a BAS statement and a tax return are not the same. A BAS is used for reporting and paying your business's GST liabilities and other tax obligations like PAYG withholding and PAYG instalments. A tax return, on the other hand, encompasses a broader range of income and deductions for individuals or entities, including businesses.

What to expect from firms offering BAS preparation services?

When engaging a firm for BAS preparation services, you can expect them to handle various tasks related to your BAS, including:

• Reviewing and categorising your financial transactions.
• Ensuring compliance with GST regulations and other tax obligations.
• Preparing and lodging your BAS on time.
• Providing advice on tax deductions and credits.
• Keeping you informed about changes in tax laws that may affect your business.
• Offering guidance on record-keeping and financial best practices.

Choosing a reputable firm with experienced professionals is important to ensure accurate and compliant BAS preparation. Consider hiring The Kalculators to have an experienc