The ATO (Australian Taxation Office) issues two types of activity statements, which businesses can use to report as well as pay their tax liabilities. These are IAS (Instalment Activity Statement) and BAS (Business Activity Statement).
The IAS or Instalment Activity Statement is a pre-printed document that summarises the number of PAYG instalments, PAYG withholding and ABN withholding and is issued every month by the ATO. IAS is applicable to taxpayers who haven’t registered for GST (Goods and Services Tax).
If the annual turnover of your business crosses a certain threshold, you will have to register for GST and then start lodging your Business Activity Statement (BAS) with the Australian Taxation Office.
So, we have prepared a guide that explains everything you need to know when it comes to BAS. Let’s dive into it.
What Is BAS (Business Activity Statement)?
First, what exactly is BAS?
A BAS or Business Activity Statement is a form that businesses need to submit to the ATO to report and pay tax liabilities. This statement summarises the taxes a business has paid all in a single transaction. The following taxes are included in this summary:
- GST (Goods and Services tax)
- Pay-as-you-go (PAYG) income tax instalments
- Pay-as-you-go (PAYG) tax withheld
- WET (wine equalisation tax)
- LCT (luxury car tax)
- Australian Business Number (ABN) withholding tax
- Fuel tax credits
- FBT (fringe benefits tax) instalment
BAS and GST
How is BAS related to GST?
As the BAS is utilized for reporting and paying GST, it is closely tied to this tax.
GST, or Goods and Services Tax, is a value-added tax applied to the sale of goods and services. A business with an annual turnover of more than $75,000 has to register for GST.
Once the business is registered for GST, it has to charge GST on its taxable claim, followed by claiming credits for the GST paid in its taxable purchases. Now, on the BAS, the net GST amount (which is the amount of GST claimed on purchases subtracted from the amount of GST charged on its sales) is reported.
A positive net GST amount represents that the business has to pay the amount owed to the ATO. A negative net GST amount, on the other hand, means that the business may be entitled to a refund.
How does a Business Activity Statement (BAS) work?
The Business Activity Statement (BAS) serves as a crucial tool for businesses to fulfil their tax obligations with the Australian Taxation Office (ATO). Through this form, businesses report details on taxable sales, purchases, and various tax responsibilities like GST and PAYG withholding.
Upon submission, the ATO utilises this information to compute the business’s tax liability. It’s essential for businesses to pay any owed taxes by the specified due date, ensuring compliance with taxation regulations.
The BAS essentially streamlines the process, providing a structured means for businesses to convey their financial activities to the ATO and settle their tax dues promptly.
How Is BAS Calculated?
Since you have figured that you need to complete the Business Activity Statement, the question arises, “How do I get the figures to use in it?”.
Follow the given steps if you want to calculate BAS.
Determine Taxable Sales
First, you need to determine the total value of all the business sales that are subject to GST. It should include all sales of goods and services that aren’t exempt or outside the scope of Goods and Services tax.
Determine Taxable purchases
Now, you need to determine the total value of all the business purchases that are subject to GST, for which a credit can be claimed.
It includes the purchases of goods and services that are used in the course of conducting business, for instance, rent of commercial space, telephone and cost of goods. However, the expenses that are outside the scope of GST or exempt are not included in this.
Calculate GST on sales
Calculate the GST owned on taxable sales by multiplying them by the current GST rate, 10% in Australia.
For instance, if the total business sales were $300,000 and it is multiplied by 10%, you get $30,000, which is GST collected.
Calculate GST credits on purchases
Just like on sales, now calculate GST credits on purchases. GST credits on taxable purchases are calculated by multiplying the total purcahses by 10% (current GST rate).
Suppose total business purchases were $50,000, and it is multiplied by 10%. You get $5,000, which is your GST credit.
Calculate the net GST amount
When GST credits are subtracted from the GST owed on taxable sales, you get the net GST amount.
While the positive net GST amount means that the business owes this amount to the ATO, the negative net GST amount means that the business may be entitled to a refund.
Complete the BAS form
You have to record this net GST amount on your BAS along with other tax obligations like instalments PAYG withholding tax, fuel tax credits or luxury car tax.
Now, you are ready to lodge your BAS. You have to submit your completed BAS online to the Australian Taxation Office by the due date.
How To Prepare BAS?
Let’s explore the steps to prepare your BAS (Business Activity Statement).
The following is a general guide, so keep in mind that the steps to prepare a BAS may vary as per the specific requirements of a business and the reporting period.
Step 1: Understand Your Reporting Obligations
First, you have to identify the reporting period for your BAS. Along with this, you need to know the due date for submission.
Your annual turnover will decide how often you need to complete a BAS and when to submit it.
When annual turnover is more than $20 million
In this case, a BAS needs to be lodged monthly. You have to submit a BAS within 21 days of that month’s closing.
When annual turnover is less than $20 million
If the annual turnover is less than $20 million, a BAS needs to be lodged quarterly. The following are the deadlines:
- July-September or Quarter 1 BAS is due on 28 October.
- October-December or Quarter 2 BAS is due on 28 February.
- January-March or Quarter 3 BAS is due on 28 April.
- April-June or Quarter 4 BAS is due on 28 July.
You may be able to lodge your BAS annually if your turnover is less than $10 million. However, you still have to pay a quarterly instalment of the Goods and Services tax you owe.
Less than $75,000 annual turnover or $150,000 for non-profits
In this case, you will lodge your base annually, and it will be submitted with your income tax return.
Step 2: Gather Financial Information
Then, you have to collect all the relevant financial records for the reporting period. This includes sales, purchases and all other financial transactions.
Step 3: Calculate GST (Goods and Services Tax)
Determine the total sales and total purchases subject to GST. Following this, you must calculate the GST payable on sales and GST credit on purchases.
Step 4: Complete BAS Form
Now, you will have to obtain the official BAS form from the ATO website or your accounting software.
In this form, you will have to fill in the required information. This includes business details as well as the financial data collected.
Step 5: Report GST
On your BAS, you must calculate and report GST obligations. The following points can help you know where you should put the information.
You can report the total value of all taxable sales made by the business during the reporting period at G1.
GST on sales
The total GST owed on the taxable sales has to be entered at 1A.
Make sure that you calculate the total value of all the taxable purchases the business had to pay for during the reporting period.
GST on purchase
The total GST credits on taxable purchases are entered at 1B.
GST payable or refundable
Determine the net GST amount by deducting the GST credits from the GST owed on taxable sales.
Step 6: Report other Taxes and obligations
If applicable, report other taxes and obligations such as Pay As You Go (PAYG) withholding for employees.
Step 7: Reconcile and Verify
You must double-check all figures to ensure accuracy. Also, make sure to reconcile your BAS figures with your financial records to ensure they match.
Step 8: Submit the BAS
The most important step is to submit the completed BAS form to the ATO by the due date.
You can usually submit it online through the ATO Business Portal or using your accounting software.
Step 9: Pay any amounts due
If your BAS indicates that you owe money, ensure that you pay the amount by the specified due date to avoid penalties.
Step 10: Keep records
Retain copies of your BAS and all supporting documentation for at least five years, as the ATO may conduct audits.
Step 11: Seek professional advice
If you’re unsure about any aspect of your BAS preparation, consider seeking advice from a BAS agent or a tax agent. With Clear Tax Accountants, you not only get to lodge your BAS with ease but also get advice regarding your tax matters. Contact us today!
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