Best practice on preparing the Business Activity Statements

Business Activity Statement

The BAS is a form required by the Australian Taxation (ATO) for all registered businesses. By law, every business is required to report all tax obligations. If your business has an annual turnover of $75,000, you are required to register for GST and lodge a BAS statement. After registering for GST, the ATO will automatically send you a business activity statement when it is time to lodge your BAS.

Once your business is registered for GST, you must include GST in the sale price of your goods. But there are some exceptions. Some goods are GST-free including most of the basic foods like bread and milk, some education courses, and some medical products and services. If your business falls into any of these categories, it is best to seek advice to your accountant or contact the ATO to have clear understanding on how the report works.

Business Activity Statement are in essence, a breakdown of your business’ payments regarding:

• Goods and services tax (GST)
• (PAYG) income tax instalment
• (PAYG) tax withheld
• Fringe benefits tax (FBT) instalment
• Luxury car tax (LCT)
• Wine equalisation tax (WET)
• Fuel tax credits

Lodgement Dates

All business owners who are registered for GST must lodge a BAS for each period, whether monthly or quarterly. The following are important dates in relation to the lodgement and payment of your BAS:

In the case of a lodgement/payment falling due on a weekend or public holiday, it is due by the next business day.

Preparing your BAS

Period

All businesses registered for GST use the business activity statement to complete their GST returns. Your reporting and payment period is shown on your business activity statement and will be monthly, quarterly or annually.

Accounting Method Basis

When you register for GST you need to select whether you will report on an accruals basis or a cash basis. Accruals basis means that you will be reporting your GST when you prepare your sales invoice or receive your expense invoice, regardless of whether you have actually received, or made, a payment for the invoice.

Non-Accrual or cash basis means that you report your GST based on when cash is received or paid out, regardless of when the transaction occurred.

Reconciliation of Accounts/Records

It is important to reconcile all the bank transactions. Check the Trade Debtors and Creditors report and mark as paid the necessary invoices. Post the month end closing entries related to fixed assets and any adjustments. Do not forget to check the PAYG figures too.

GST coding of transactions

Once the accounts have been reconciled and checked the reports, it is best to check first the GST coding of the transactions using any report available to your accounting system before lodging the BAS. Make the necessary revision of GST coding if needed. Once done, it is highly recommended to lock the date in your accounting system, this is to ensure that there will be no changes after reconciling and reviewing the accounts.

BAS Calculation

There are several ways you can calculate your BAS: 

1. Calculate and report GST quarterly

Available to all quarterly businesses. Calculate and report all the GST labels in your business activity statement and pay your actual GST amounts quarterly.

2. Calculate GST quarterly and report annually

Available to all businesses with a turnover of less than $20 million. Calculate and pay your actual GST amounts quarterly but report only the GST collected and paid and total sales for each quarter.

3. Pay GST instalment amount and report annually

Available to all businesses with a turnover of $2 million or less, which allows you to pay an ATO determined GST instalment amount quarterly.

For GST reporting options 2 and 3, an annual GST reconciliation is required to be completed and lodged with the ATO.

4. Pay as you go (PAYG) income tax instalment

PAYG instalments require you to pay incremental amounts towards your expected end of year income tax liability. To make sure your income tax assessment takes into account the instalments you've paid through the year, you need to finalise your PAYG instalments before you lodge your income tax return.

Paying BAS instalments 

Generally, you can choose between two options for calculating and paying your PAYG instalments, which will apply for the remainder of the income year:

Option 1: Installment amount

A pre-determined amount calculated by the ATO.

Option 2: Installment rate

Calculate your PAYG instalment amount based on your actual income multiplied by a rate that the ATO provides. Great for seasonal businesses where income can fluctuate.

If you aren’t registered for any of the other items on a business activity statement (such as GST or PAYGW), but you are required to pay a tax instalment, then the ATO will send you an instalment activity statement (IAS) rather than a business activity statement (BAS).

If you do not want to vary the instalment amount shown on your instalment notice, you only need to pay the amount shown by the due date and you don't need to lodge the notice.

Pay as you go (PAYG) tax withheld

Under PAYG withholding, businesses must withhold tax from certain payments made to others, which is then paid to the ATO. These include:

• payments to employees, company directors and officeholders
• payments to workers under labour-hire agreements
• payments under voluntary agreements
• payments where an Australian business number (ABN) has not been quoted in relation to a supply

You must report any withheld amounts in the PAYG tax withheld section of your business activity statement (BAS).

Fringe benefits tax (FBT) instalment

Fringe benefits tax (FBT) is a tax that employers pay on certain benefits they provide to their employees. The benefits may be in addition to, or part of, their salary or wages package. FBT is separate from income tax.

If you are required to pay FBT, then FBT instalments (a pre-determined amount calculated by the ATO) are payable as part of your business activity statement. 

Luxury car tax (LCT)

Luxury car tax (LCT) applies to all supplies and importations of luxury cars where the value (including GST) exceeds the LCT threshold. The value generally also includes the price paid for accessories and modifications made to the car before delivery.

LCT Thresholds

LTC threshold (as of June 2020) are as follows:

Wine equalisation tax (WET)

Wine equalisation tax (WET) only applies to wine manufacturers, wholesalers, and importers. Retailers do not have a WET liability unless they make wholesale sales or bottle their own wine.

WET is a tax based on the value of wine. WET applies at 29% of the value of the wine at the last wholesale sale (before adding GST).

Fuel tax credits (FTC)

Fuel tax credits provide businesses with a credit for the fuel tax (excise or customs duty) included in the price of fuel they use in machinery, plant equipment and heavy vehicles for business purposes. You must be registered with the ATO for GST and Fuel Tax Credits to make a claim.

Lodging BAS

If you are using the online services for individuals and are registered via the Business Portal (myGov) you can access and complete your BAS online. If you are not registered, your business activity statement will be sent to you in the mail and you lodge it via post. You can also submit your business activity statement through a registered tax agent or BAS agent.