Making Sense of Your BAS Statement: What You Need to Know

As a business owner or manager in Australia, the Business Activity Statement (BAS) holds the key to your financial responsibilities. Understanding your BAS  is vital for staying on top of your tax obligations and shielding your business from the risks of burdensome penalties and interest levied by the ATO. Ensuring proper understanding of this statement will help you maintain compliance with tax regulations and manage your financial obligations effectively.

This article will help you understand the BAS statement, breaking down its components and demystifying the terminology, so you can approach it with confidence and gain a comprehensive grasp of its significance.

What is a Business Activity Statement (BAS)?

A BAS, which stands for Business Activity Statement, is a crucial financial document used in Australia. It is primarily used to report and pay various taxes to the Australian Taxation Office (ATO). Businesses, whether sole traders, partnerships, companies, or trusts, are required to submit the BAS to the ATO on a regular basis, typically quarterly.

business activity statement

Your BAS serves as the platform for reporting and paying various taxes and obligations on behalf of your business. It covers essential elements such as Goods and Services Tax (GST), along with other taxes like Pay as You Go withholding (PAYGW), Pay As You Go instalments (PAYGI), and Fringe Benefits Tax (FBT). 

While the majority of BAS statements are commonly submitted every quarter, some businesses may have different requirements, leading them to submit it on a monthly or annual basis, depending on their unique circumstances.

The BAS statement plays a crucial role as a key tool for the ATO to monitor tax law compliance. It works in conjunction with other lodgment obligations like Single Touch Payroll (STP) and annual income tax returns, enabling the ATO to effectively oversee businesses’ adherence to tax regulations and obligations.

The Key Elements of BAS

Understanding what BAS is and why it holds importance lays the foundation for effective management and compliance. 

Once your bookkeeper presents you with the BAS statement, it is vital to conduct a thorough review to ensure its accuracy and completeness. So, here are some key elements of the BAS statement you should review to ensure that your financial records are reliable and compliant with regulatory requirements:

1. Business and Contact Information

business and contact information

Usually, the initial section of the BAS statement contains essential details such as your business name, ABN, and contact information. Make sure that these details are accurate to avoid any delays or penalties.

This part of the BAS will also indicate the “GST Accounting method,” presenting the two distinct reporting methods as follows:

  • Cash – Settle GST collected and assert credits in the period when customer and supplier invoices are paid.
  • Accruals – Report and pay GST in the period the invoices are issued, regardless of whether they are still outstanding at the end of that period.
Reminder: Businesses with a gross turnover of under $10 million have the option to opt for the cash accounting method for their GST reporting. Understanding whether your business employs the cash or accrual method for GST is crucial, as these two approaches can yield significantly different outcomes from one period to another.

2. GST Information

Within the GST section of the BAS statement, you will find the total amount of GST collected from sales and the corresponding amount paid on purchases.

3. Tax Period

The BAS statement will specify the tax period it covers. Commonly, the tax period indicated on the BAS statement will align with a quarterly time frame, concluding on 30th September, 31st December, 31st March, and 30th June annually.

By computing the difference between these figures, you can determine the net GST amount that you either owe or are eligible to receive as a refund. The resulting sum will differ based on the reporting method you utilise, whether it’s cash accounting or accruals.

4. PAYG Withholding Information

When tax withholding from your employees’ wages is mandatory, the BAS statement will contain a dedicated section for PAYG withholding details. In this section, you’ll find the total tax amount withheld from your employees’ wages and the corresponding sum remitted to the ATO.

Usually, the PAYGW section will pertain to the monthly period, while you’ll need to lodge an Instalment Activity Statement (IAS) for PAYGW for the remaining two months within the quarter. This distinction arises because, as a medium withholder (withholding over $25,000 annually from wages), you must report and pay PAYGW monthly. On the other hand, if you are a large withholder (withholding over $1 million annually from wages), you are obliged to remit the payment within 8 days of the staff being paid.

5. Other Taxes and Obligations

tax and obligations

Your specific situation will determine whether the BAS statement encompasses additional sections for other taxes and obligations, such as FBT or luxury car tax. FBT pertains to certain non-cash benefits offered to your employees, and if applicable, it will be included in the statement.

6. Total Amount Payable or Refundable

Upon reaching the end of the BAS, you will need to compute the overall sum of tax that you owe or are eligible to receive as a refund. In case the amount is payable, it is essential to remit the payment by the due date to prevent potential interest charges imposed by the ATO. 

Regardless of whether your business cash flow permits full payment, it remains crucial to lodge the BAS by the due date. After lodging the BAS and if you encounter difficulty in paying off the debt due, you have the option to request a payment plan from the ATO. If the debt is less than $100,000, the recommended approach for applying for a payment plan is through their online services. It is advisable to submit the application before the payment due date to ensure timely consideration.

Reminder: Ensuring the timely lodgment and payments, even when on a payment plan, is of utmost importance. Failure to comply may lead to the ATO issuing a Director Penalty Notice (DPN). Should you receive a DPN, seeking immediate advice is crucial to prevent personal liability for any outstanding PAYGW, GST, or unpaid staff superannuation.

Manage your BAS Statement Seamlessly

Your BAS plays a pivotal role in your business operations, making it crucial for you to possess comprehensive knowledge and understanding about it. In order to manage your BAS seamlessly, you need to do these two things: Accurate record-keeping and use an efficient Cloud-based Accounting System.

record keeping and accounting software

In the event of an ATO review of your lodged BAS, it becomes imperative to support each claim with proper documentation. Maintaining meticulous records of financial transactions, including sales, purchases, and payments, along with relevant source documents like tax invoices, is essential. 

Modern cloud-based accounting systems offer comprehensive reporting, enabling efficient preparation of your BAS, whether using the cash or accrual method. Combining the expertise of a highly qualified bookkeeper with a cloud-based accounting system ensures ongoing compliance with your BAS obligations. 

These valuable resources empower you to confidently manage your BAS, navigate the tax landscape with ease, and safeguard your business’s financial health, minimising the risk of penalties and interest charges from the ATO.

At BloomWealth Accounting, our passion lies in providing our clients with the knowledge and insights they need to effectively and profitably manage their businesses. With our expertise in business tax and accounting, we are dedicated to supporting you every step of the way. Feel free to reach out to us today, and let us assist you with all your business tax requirements.

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