Back To BAS Basics…
No, that wasn’t a stutter or a hiccup – you read it correctly – BAS Basics. That’s what we are going to discuss in this article: the ABC of BAS – Business Activity Statements.
As a registered tax agent, certified management accountant and predominantly handling small business tax accounting, we do look after BAS statements on behalf of many clients.
However, these days it is very common for small businesses – especially sole traders with fairly simple business models – to attend to quarterly BAS statements themselves.
It is now relatively simple to do your BAS online – on the ATO’s website – which most people access through their MyGov. You may like to read our post important tips for Business Accounting & Record Keeping
For Larger Complex Business Structures
For larger and more complex businesses or trusts it is wise to have a registered BAS agent take care of your quarterly statements.
At CGH Accounting Services, our accountants are always happy to deal with tasks such as lodging BAS Statements, as well as the trickier stuff such as self-managed super fund accounting, business advice and financial accounting. As long as they’re using their calculators, our accountants are happy.
Whether you’re a small operator who prefers to get your ‘small business accountant near me’ to sort it out – or you’re so flat out on the tools that it works out better to get a tradie accountant to do all your paperwork – you should nevertheless understand the basics of BAS.
And for those of you who are doing your own BAS statements – but perhaps a bit uncertain about some aspects of it – read on, as we explain it all below in layman’s terms.
BAS Is All About GST – The Goods and Services Tax
BAS is all about GST, essentially. That’s Goods and Services Tax. This is one of the Government’s major taxation revenues.
If you charge GST when you invoice customers, that GST is destined to be transferred to the Government’s coffers, and the onus is on you to do this in an accurate and forthright manner.
Effectively, this means that all of us in business who are charging GST and later sending those monies across to the Government, are all little tax collectors for the ATO. That’s how it works.
You Can’t Charge GST And Keep It
You can’t charge GST and then keep it for yourself; it’s actually the Government’s money as soon as it’s identified as GST upon the thousands of transactions which take place every minute across Australia.
And the ATO comes calling for it four times a year. If you are charging GST and not passing it on to the ATO, you are in serious breach of the law and they will be all over you like a cheap suit pretty quickly, so definitely make sure you are doing the right thing with this.
Are You Starting A Business? Ask Us For Advice
If you are just starting out in business, reading this and it’s already sounding scary, then it could well be a good idea to look for ‘accountants near me’ and sit down for a chat with an expert. Read our post on Starting A New Business
If you are in Ballarat or Torquay, that’s us! It’s really important to understand the first steps to take, such as ABN registration (or how to apply for an ABN) and how to register for GST.
You can find this information online (on MyGov or the ATO’s website, as mentioned), but many people feel more at ease chatting with an accountant or CPA (Certified Practising Accountant) initially. Please contact us if you wish to sit down and talk with a professional.
Where Is GST Payable?
GST. We all pay it, nearly every time we purchase something, whether it’s an ice cream, a chair, a bill from a tradesperson, an indoor plant or whatever… There are some exceptions: milk, bread, flour, water, sewerage, health & education and certain medications. But everything else has 10% added to the total – which is your GST.
When you buy a bunch of sausages at the butchers and you pay them 10% GST, that sum is destined to go back to the ATO eventually. It doesn’t magically leap across to their account instantaneously; that butcher has to transfer it to the Tax Office, along with all the other GST the butcher takes in that quarter.
This is done through the process of preparing a report called a Business Activity Statement (BAS), and subsequently paying the amount due.
You Must Register For GST If Your Business Turns Over More Than $75,000 Per Year
You must register for GST if your business turns over more than $75,000 a year. Many businesses who turn over less than this are registered for GST, but technically they don’t have to be.
Businesses which tend to make less than this threshold figure may choose to collect and pass on GST because their income varies a lot; some years they might make over $75K, some years under. So, it’s just easier to raise proper tax invoices and run with that.
Others prefer to begin in business by setting up an invoicing system which incorporates GST – even when their business is very small – so that they start off on the right foot and get into the habit of dealing with these matters from the get-go.
It can also be advantageous to register for GST even if your turnover is less than the threshold, because then you can claim credit for the GST you pay (capital items and stock – see below for some more detail on this). If you are starting out in business and unsure, we strongly recommend you talk to a tax accountant or tax agent first.
How To Register For GST
Registering for GST is not difficult. You can do it online or through an accountant. But firstly, you will need an ABN – that’s an Australian Business Number. Again, not hard to get online, or an accountant can help you with it.
Once you’ve got your ABN, are registered for GST and start making sales – you basically add 10% to everything you sell – and this should be clear on all your invoices and receipts. There are some exceptions to this rule; for instance, with certain food & beverage, health and essential services. If you think an exception might apply to you, find out for sure by talking to your trusted local accountant.
What Details Should Your Invoice Include?
Your invoice must display your business name and ABN, the date, itemised account of goods or services sold and the total including GST. Setting up your invoicing system can be daunting for many beginners, so if that’s you, don’t hesitate to get in touch with small business accounting professionals.
You need to be absolutely sure you are setting your prices right and complying with the law correctly when it comes to invoicing the public.
It’s Time For Your BAS Statements
BAS. Your ABN registered enterprise will now get a friendly reminder four times a year, to inform the business owner that it’s BAS time. This means it’s time to basically add up the money you’ve made in that quarter and the GST you’ve collected.
The GST is then sent over to the ATO (less deductions, where applicable). You can opt to do your BAS records every month or once a year, but the vast majority do this quarterly. What are the quarters?
When Are The Due Dates For BAS Statement Lodgement?
- 1st Quarter (July to September) due 28 October
- 2nd Quarter (October to December) due 28 February
- 3rd Quarter (January to March) due 28 April
- 4th Quarter (April to June) due 28 July
Give Yourself Another Month By Using A Tax Agent
Handy hint: if you use a tax agent or tax accountant to do your BAS, you’ll get an extra month to lodge and pay.
Can You Claim GST Payments? Yes, You Can
The Tax Office knows that you are not just collecting GST; you are also paying it – to your suppliers. These GST payments can be claimed back, i.e., you add them up (you must keep the paperwork as evidence) and deduct this from the total GST you owe the ATO. In other words, GST collected minus GST paid equals amount owing to the ATO.
The More Complicated Aspects….
Now this is pretty straight forward for most small businesses with a simple model, but when you start bringing in elements like PAYG, cancelled sales, bad debts and other more complex issues, then it’s time to hand it over to a small business accountant.
It’s generally not worth the time and effort trying to figure out these kinds of things yourself. Plus, if you get it wrong, you could get yourself into trouble.
As mentioned, if you are doing your BAS yourself, this is done on the ATO website, usually through MyGov. Or, it can be done through the ATO Business Portal (for larger businesses). It can even be done old school – by paper or phone! Just make sure you do it on time, every time. Even if you can’t pay the GST for some reason, lodge the BAS report on time and sort out the debt to the ATO later.
Tips For Making Your BAS Life Easier
- Opening a tax holding account, which helps you ensure you always have enough in the tank to cough up for GST when it comes around again.
- Use cash accounting rather than accruals accounting (this is what most people default to – basically reporting on the money when it is actually paid, not when you generated the invoice – for more information, chat to one of our experts)
- Use business accounting software; Xero is what all our clients use
- Use a tax agent or accountant
Don’t forget folks, March is one of the best months on the Ballarat calendar as it is the time of year when we put on our world-famous Begonia Festival!
www.ballaratbegoniafestival.com
From Torquay, the Great Ocean Road will take you to a special March event which attracts international acts and people from far and wide: the fantastic Port Fairy Folk Festival.
