Are your clients ready for BAS Tax? Here’s what they need to know.
Tax has to be one of the most unpopular subjects for business owners. And we understand why. Trying to comprehend the in’s and outs of tax can be a daunting task. But it doesn’t need to be. With some preparation and basic knowledge, your clients can make life a whole lot easier for themselves and avoid some nasty repercussions from failing to meet their obligations.
One of the most valuable and time-saving areas of tax preparation they can do is to get their head, and their accounting, around BAS tax.
What is a Business Activity Statement?
BAS is a business activity statement business owners lodge with the government to let them know how much GST the business has collected on sales, and how much has been paid on purchases and expenses. The ATO uses their BAS information to calculate the GST bill or refund.
BAS is also used to determine income tax if the business is using the pay-as-you-go (PAYG) system. It is also used to determine:
- Luxury car tax
- Fringe benefits tax
- Wine equalisation tax
- Fuel tax credits
- Employee income tax
Who needs to do it?
Any business registered for GST is required to submit a BAS. Your client’s business should be registered for GST if they make or expect to make over $75,000 annually.
When does BAS need to be lodged
Business owners will need to fill out a BAS form between one and 12 times a year, depending on how much the business is turning over:
Less than $75,000
- Lodge BAS annually with your income tax
Under $20 million
- Lodge BAS quarterly
- Quarter 1 (July-September) BAS is due on 28 October
- Quarter 2 (October-December) is due on 28 February
- Quarter 3 (January-March) is due on 28 April
- Quarter 4 (April-June) is due on 28 July
If the business turnover is under $10 million your client may be able to lodge their BAS annually, however, they will still need to pay a quarterly instalment for the GST owed.
- Lodge monthly and within 21 days of the month closing
What business owners need to do to prepare
1. Invest in accounting software and create categories according to BAS
Using good accounting software can help make preparing for BAS much easier and helps to pull reports when it comes time to lodge BAS and income tax.
Business owners can set up an accounting system according to the categories they’ll need to report on for BAS such as employee income tax, fringe benefits etc.
2. Keep accurate records
When it comes to preparing to lodge a BAS, business owners will want to have thorough records of all their purchases and sales.
Establishing a weekly accounting practice of recording all transaction the business has conducted is useful.
The records should include:
- Type of transaction
- GST (if applicable)
If they don’t have an accounts team or time to do the weekly accounting, they may consider investing in hiring a bookkeeper. Even if it’s a couple of hours a week or fortnight, the time, money and stress they will save themselves when it comes to lodging tax will be worth the money spent.
3. Keep receipts and tax invoices
While they won’t need to submit their receipts and tax invoices when they lodge their BAS, the ATO can and may request to see them later. Business owners should make sure to keep a reliable filing system and have all the documents on hand.
How to lodge BAS
Your clients can lodge their BAS multiple ways depending on the size of the business and what they are comfortable with.
- Through a registered tax and BAS account agent
- Via the ATO’s online business portal
- If they’re a sole trader they can lodge using myGov account
- Through accounting software
- By mail (if they have their BAS form sent to your client)
What happens if they don’t lodge their BAS on time?
If your clients don’t meet the BAS lodgement obligations on time, they may receive a Failure to Lodge fine. The FTL penalty unit (amount) is determined according to the size of the entity.
- For a small entity they’ll receive a penalty unit for every 28 days late the BAS lodgement is, to a maximum of five units
- For a medium entity (assessable income or current GST turnover of more than $1 million and less than $20 million) the penalty is multiplied by two
- For a large entity (assessable income or current GST turnover of $20 million or more) the penalty is multiplied by five
Your client will be warned by the ATO prior to being penalised if it is an isolated case. If they are unable to pay their GST bill it is essential they still lodge BAS then apply for a payment plan through the ATO.
Does your client need finances to invest in accounting software, services or to help cover their tax bill? Talk to our team to see if a short-term business loan can help. Get in touch with your BDM or call us on 1800 831 294.