Answers to all your questions about BAS statements
A business activity statement, or BAS, is a document that businesses are required to file with the Australian Taxation Office (ATO) on a regular basis.
This document serves as a way for businesses to report their taxable sales, GST (goods and services tax) collected and other financial information to the ATO.
Whether you’re a sole trader or a company, understanding the basics of your BAS is essential for ensuring compliance with the ATO and staying on top of your finances.
What is a BAS?
A BAS is the form that needs to be filled out and sent to the ATO on the amount of GST you’ll need to pay. It’s also used for calculating:
- Business income tax
- Employee income tax
- Fringe benefits tax
- Luxury car tax
- Wine equalisation tax
- Fuel tax credits for the business
The frequency of filing a BAS depends on the size of the business. It could be once a year, quarterly or 12 times a year.
Once you register your business for an ABN and GST, the ATO will automatically send you a BAS when it’s time to file.
The ATO will tell you how often they require you to report and pay.
Pro Tax Tip: You won’t need to register for a BAS or claim GST credits until your business earns over $75,000 per annum.
Related: Does your business need to register for GST?
How does a Business Activity Statement work?
When it’s time to file a BAS, it’s important to have all the necessary information readily available. This includes a record of all:
- Other costs associated with the business
When filling out the BAS, it is important to know the sales for the period, the GST collected, the GST paid on expenses, wages paid to staff, and the tax withheld from wages (PAYG Withholding).
Keeping logbooks and stocktake records is also recommended.
It is worth noting that:
- GST credits can only be claimed for the business portion of any GST on purchases
- GST credits cannot be claimed for private expenses such as entertainment or food
If an item is used for both business and personal purposes, only the business portion of the GST can be claimed.
Many businesses choose to outsource their bookkeeping to a professional service to ensure accuracy and to save time, as running a business can be demanding and time-consuming.
BAS due dates
Your BAS will be measured by your businesses income and the due date set by the ATO.
If your business earns over $20 million annual turnover, you’ll need to lodge and pay your BAS within 21 days of the month’s closing.
Businesses with less than $20 million annual turnover can have quarterly deadlines:
- Quarter 1 (July-September) — BAS is due on 28 October
- Quarter 2 (October-December) — BAS is due on 28 February
- Quarter 3 (January-March) — BAS is due on 28 April
- Quarter 4 (April-June) — BAS is due on 28 July
Those businesses earning less than $10 million annually may lodge their BAS once a year, but you’re still required to pay quarterly GST instalments.
Businesses earning less than $75,000 or $150,000 for non-profit organisations, can request to lodge annually or submit the information with their yearly tax refund.
Pro Tax Tip: If you use a registered BAS agent to help you prepare and lodge your BAS, the due dates for lodgment may be extended.
What is GST?
The GST, or Goods and Services Tax, is a value-added tax applied to most goods and services sold for consumption within the country.
The tax is paid by consumers, but it is collected by businesses and sent to the government.
Unlike other taxes, GST is included in the final price of goods and services, making it an indirect consumption tax. However, it is important to note that not all goods and services are subject to GST.
One of the main benefits of GST is that it simplifies the tax system by replacing multiple state-based taxes — such as sales tax, service tax, and excise duty tax — with a single tax. This allows for a more streamlined and efficient process for both businesses and the government.
How to calculate GST
When adding GST, you’ll need to multiply the sales amount by 0.1, or 10%. You can also multiply the original price by 1.1, or 110%. This will give you the final price with GST included.
For example, let’s say the price of a product is $100, and you want to calculate the GST amount and the total price including GST. By multiplying $100 by 0.1, you get $10 as the GST amount. You would then charge your customer $110.
There may be instances where it is necessary to subtract GST in order to determine the GST amount included or the original price before GST was added. To calculate the GST included in a total price, you can divide the price by 11.
If the price of a product (including GST) is $110, just divide that amount by 11 to find the GST amount, which is $10.
To get the pre-tax sales figure, divide $110 by 1.1, which gives you $100.
Pro Tax Tip: GST is paid on the date you’re required to lodge your BAS. If you’ve paid more GST than you need to, the ATO will refund the overpaid amount. However, they’ll be on your tail to pay any amount you owe.
What is PAYG withholding?
When paying employees and some contractors, it is necessary to withhold a portion of the payment and submit it to the ATO.
PAYG withholding prevents individuals from owing a significant amount of taxes at the end of the financial year.
As an employer, you’re obligated to pay income tax to the ATO on behalf of your employees or contractors to help them meet their tax obligations.
PAYG is the income tax your employee or contractor is obligated to pay based on their wage or salary and is paid by you at their time of payroll. These payments go towards their annual obligations to avoid them having to pay a lump sum at the end of the year.
You’ll need to register and have an active Australian Business Number (ABN) to pay your employees’ or contractors’ PAYG. Payments are made via Single Touch Payroll (STP).
Register your ABN, GST, PAYG and business name at the Australian Business Register.
What Is STP?
The Single Touch Payroll initiative, implemented by the Australian government, aims to streamline the process of reporting payroll information to government agencies for employers.
Instead of submitting separate reports, employers are required to use STP-enabled software to transmit the following data every time they pay their employees:
- PAYG withholding
This mandatory requirement was phased in, with employers of 20 or more employees beginning STP reporting on July 1, 2018, and smaller employers with 19 or fewer employees starting on July 1, 2019.
The 2019-2020 budget announced an expansion of the data collected through the STP system, also referred to as STP Phase 2.
This expansion aims to lighten the reporting burden for employers who have to submit information to multiple government agencies.
It also helps ensure that Services Australia customers, which may include the employer’s employees, receive the correct payments in a timely manner.
The mandatory implementation of STP Phase 2 reporting began on January 1, 2022.
How does STP work?
The STP system operates by transmitting tax and superannuation information from an employer’s STP-enabled payroll or accounting software to the ATO as part of the payroll process.
Employers can continue to pay their employees and provide them with a payslip on their usual schedule:
The STP-enabled software will then send a report to the ATO that includes relevant information such as salaries, wages, pay as you go withholding and superannuation liability information.
Your employee or contractor will be able to see their payment in real-time through their MyGov portal.
At the conclusion of each financial year, employers are required to finalize their STP data, indicating that they have completed their reporting for that year.
Once the data is finalized, the employees’ income statement in the ATO online services will be marked as “Tax ready.” The employees, or their authorized representatives, can then use this income statement to file their tax returns.
Pro Tax Tip: If you use a BAS agent to help prepare and lodge your BAS, make sure they are registered with the Tax Practitioners Board (TPB). You have no protection if you use an unregistered BAS agent. Search the TPB register to find a registered agent here.
Related: A guide to worker’s compensation insurance
What if my BAS is late?
It is crucial to file your BAS on time. Failure to file on time can result in penalties imposed by the ATO. To avoid penalties, submit your BAS when it is due, even if:
- You’re unable to pay at that time
- No trading happened during that period
Pro Tax Tip: A BAS agent can work directly with the ATO to come up with a payment plan for you to pay your BAS obligations.
Make a mistake on your BAS?
You may make a genuine mistake on your BAS, or need to adjust the amount if something has happened.
Mistakes are usually administrative errors such as inputting the wrong amount or omitting GST on a sale.
Adjustments refer to reporting changes to an item that was correct at the time of reporting, such as returned goods or a cancelled sale.
Mistakes can be corrected on the next BAS filing or with the help of a tax agent. Note that it’s best to correct your information as soon as you discover the discrepancy.
Minimise stress with these BAS tips
Here are some suggestions to help you file your Business Activity Statement correctly:
- Set up an organized system to keep accurate records of your business — such as invoices, expenses, wages, stock takes, and vehicle logbooks. This will make it easier to complete your BAS by the due date.
- Verify that GST is included on your sales invoices and only claim GST credits if you have tax invoices for purchases of $82.50 (incl. GST) or more.
- Use STP-enabled accounting software to save time and reduce manual errors. This software can automatically calculate GST for you and help you keep better records.
- Use the appropriate Payment Reference Number (PRN), also known as an EFT code, when making payments to the ATO.
- You can speed your BAS refund by ensuring that your filings are current and your banking details are correct.
Your time may be best spent running your business instead of worrying about preparing or lodging your BAS.
Outsourcing your bookkeeping and BAS reporting will enable you to get the help of a professional without employing them yourself. They’ll make sure your tasks are done right, leaving you time to get on with your business.
ITP Accounting Professionals can provide advice on your businesses tax obligations and handle your general bookkeeping and BAS requirements — no matter if you only need us one day or five days a week.