Being in business is hard and doing your finances is a necessary evil of owning your own business. However, don’t be fooled into thinking that doing your BAS is hard – it’s not!
A Business Activity Statement (BAS) is how your business reports the tax it owes to the Australian Taxation Office (ATO) during the year. The net amount of GST your business has collected on behalf of the tax office is reported and paid via this method. The form gets lodged with the ATO either by mail, or more likely these days, it’s lodged electronically by the business owner or an advisor of the business via the BAS Business Portal.
It’s recommended that all small businesses set up the Business Portal for themselves. It’s similar to internet banking, but between the ATO. Business owners can manage all lodgments via the portal and see how much you owe at any point in time should you be carrying a tax debt. In addition, lodging your BAS’ via the Business Portal grants you additional time to pay the tax bill – an added bonus.
If your business is making a profit you should, usually, always have something to pay, unless you’ve just purchased a large piece of equipment which you would have a large GST credit to claim.
Simply put your BAS is a result of keeping your accounts in order. This is a job you as the business owner should be doing – not your accountant or bookkeeper! As a business owner you should be maintaining the accounts of your business on a regular basis using integrated accounting software and by using this software you can extract the data to be transposed onto your BAS form.
So how many times do you need to lodge a BAS during the year? Larger businesses are required to report monthly, and smaller businesses can elect to do this if they want to make smaller payments however, reporting quarterly is typical.
Other than the number of time you need to lodge your BAS throughout the year, the other main variable is the accounting method you use for GST – cash or non-cash.
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Being on a cash basis means you report the net amount of GST each period based on the invoices and bills that were paid, while the non-cash method results in you being able to claim back the GST on the bills that were unpaid at the end of the period. However, non-cash also means that you have to pay the GST on those unpaid invoices with your customers.
Most businesses can use the cash method under these rules, which mean you only pay to the ATO GST on sales you have seen money for.
Payroll activity is also reported on in your BAS. This means gross wages gross wages paid to employees the tax withheld on their wages (commonly known as PAYG withholding), your business entities’ own income tax prepayment (commonly known as a PAYG installment), and potentially fuel tax credits if your business does a lot of driving, or wine equalisation tax if you manufacture wine.
On your BAS the totals of what you lodge for gross wages paid and tax withheld needs to reflect the totals on all payment summaries, if not the ATO will look into your payroll practices. A tip is to take a bit of time on this section of your BAS to avoid landing yourself in unnecessary hot water!
By keeping your accounts up to date, reconciling your bank statements each day, keeping track of unpaid customer invoices and supplier bills, and processing your payroll on time, completing the BAS each period should be as each as pressing print on whatever lodgment method you want to use.