How to Do a Business Activity Statement

A Business Activity Statement (BAS) is a standardized form Australian businesses use to report and pay various tax obligations to the Australian Taxation Office (ATO). This statement streamlines the reporting process by consolidating different tax types into a single document. Businesses registered for certain taxes are generally required to lodge a BAS regularly to ensure compliance with tax regulations.

Gathering Your Business Activity Statement Data

Businesses must gather all relevant financial information and records before completing the BAS. This preparatory step ensures all tax obligations and entitlements are correctly identified.

Goods and Services Tax (GST) is a broad-based consumption tax applied to most goods, services, and other items sold or consumed in Australia. Businesses registered for GST collect this tax on sales and can claim credits for GST included in business purchases. The net difference determines the amount owed to or refunded by the ATO.

Businesses can account for GST using either a cash basis or an accrual basis. Under the cash basis, GST is reported when payments are received or made. This method is generally available to businesses with an aggregated turnover of less than $10 million. Accrual basis accounting requires GST to be reported when an invoice is issued or received, regardless of payment. Most larger businesses use the accrual method.

Maintaining comprehensive records of all sales and purchases, including tax invoices that clearly show the GST component, is necessary for accurate GST reporting and claiming credits. Records should differentiate between taxable sales, GST-free sales, and input-taxed sales.

Pay As You Go (PAYG) Withholding relates to tax withheld from payments made to employees and sometimes contractors. As an employer, a business deducts income tax from wages and salaries. These withheld amounts must then be reported and remitted to the ATO through the BAS.

Payroll records, including gross wages paid and tax withheld for each employee, are necessary for this section. Totals reported on the BAS should align with annual payment summaries issued to employees.

PAYG Instalments represent prepayments of income tax made throughout the year by businesses or individuals with business and investment income. This system helps manage cash flow by spreading out the annual income tax liability. The ATO calculates an initial instalment amount or rate based on the most recent tax return.

Businesses can choose to pay a pre-determined instalment amount (Option 1) or calculate payments based on an instalment rate applied to current income (Option 2). Option 2 is suitable for businesses with fluctuating income, as it allows payments to adjust with earnings. The PAYG instalment amount can be varied if financial circumstances differ significantly from previous periods, provided the variation is made before the due date.

Other taxes may also be reported on the BAS, depending on the business’s activities. These can include Luxury Car Tax (LCT) and Wine Equalisation Tax (WET). Businesses in specific industries might also claim Fuel Tax Credits (FTC).

Fuel Tax Credits provide a credit for the excise or customs duty included in the price of fuel used for business activities, such as powering machinery or heavy vehicles. Eligibility for FTC requires registration for both GST and fuel tax credits. Records of fuel purchases and usage for eligible activities are needed for these claims.

Maintaining accurate and organized financial records is important. Invoices, receipts, bank statements, and payroll records form the basis for all BAS calculations.

Completing Your Business Activity Statement

Once financial data is gathered, the next step involves translating this information onto the BAS form. The ATO provides a tailored BAS form to each registered business, indicating relevant tax obligations.

The BAS form contains labels for different tax components. For instance, total sales are entered at label G1, while total GST collected on sales is reported at label 1A. Total GST paid on purchases is entered at label 1B. The net GST position is then calculated.

Amounts withheld under PAYG Withholding are reported, as are PAYG Instalments. If applicable, figures for Luxury Car Tax, Wine Equalisation Tax, and Fuel Tax Credits are also entered. The process involves transferring summarized data from accounting records to these labels.

Businesses have several methods for completing their BAS. Many prefer using ATO online services or Standard Business Reporting (SBR)-enabled accounting software, which can pre-fill some sections. These digital methods offer faster processing and help avoid common errors. A paper form can also be completed and mailed to the ATO.

A thorough review of all entries is important before finalization. Cross-referencing figures on the completed BAS with underlying financial records helps identify and correct inaccuracies.

Lodging Your Business Activity Statement

After completing the BAS, the next step involves submitting the form to the Australian Taxation Office. Timely lodgment is important to avoid penalties and maintain compliance.

The most common method for lodging a BAS is online. Businesses can use the ATO’s Online services for business, requiring a myGovID and a Relationship Authorisation Manager (RAM). Sole traders can also lodge via their myGov account. Many accounting software packages are SBR-enabled, allowing direct lodgment.

Another approach is to engage a registered tax agent or BAS agent. These professionals can lodge the BAS on behalf of a business. Using an agent often provides extended lodgment due dates for quarterly BAS.

A “nil” BAS can sometimes be lodged through the ATO’s automated phone service for businesses with no amounts to report. Lodging a paper form by mail remains an option.

Lodgment due dates vary depending on a business’s GST turnover and reporting cycle. Most small businesses report quarterly, with standard due dates typically falling on the 28th day of October, February, April, and July. Businesses with a GST turnover of $20 million or more generally report monthly, with statements due on the 21st day of the following month. Annual lodgment is available for very small businesses. If a due date falls on a weekend or public holiday, the deadline shifts to the next business day.

Payment and Post-Lodgment Considerations

Once the BAS is lodged, the focus shifts to settling any outstanding payment obligations. Prompt payment of any tax due is important to avoid additional charges. The ATO provides several methods for businesses to make their BAS payments.

Businesses can pay electronically using BPAY, direct debit, or credit/debit card via the ATO’s online services. Payments can also be made through electronic funds transfer (EFT) to the Reserve Bank of Australia, using the Payment Reference Number (PRN). Payments can also be made at any Australia Post outlet.

If a business is in a credit position, the ATO will process a refund. These refunds are typically paid directly into the business’s nominated bank account. Electronic lodgment often leads to faster processing of refunds.

Businesses are required to keep all supporting documents for a specified period after the BAS has been lodged for audit purposes. The general rule is to retain records for five years from the date of lodging the tax return to which the records relate. This includes income and expense documents, tax invoices, and payroll records. For certain assets or ongoing disputes, records may need to be kept for longer periods.

Should an error be discovered on a previously lodged BAS, an amended BAS can be submitted to rectify mistakes. It is advisable to do so as soon as possible to mitigate potential penalties or interest charges. The ATO may apply a general interest charge (GIC) to overdue amounts and penalties for late payment. However, the ATO also offers options such as payment plans or temporary deferrals in cases of genuine financial hardship, if the business engages proactively.