27TH JANUARY, 2020
The mere mention of the term ‘Business Activity Statement’ (BAS) is enough to make many business owners break out in a sweat. Even more stressful than that is having to come up with the cash to pay it if you haven’t been putting the money aside.
The stress associated with BAS time can be more easily managed when you fully understand what activity statements are, when and if they need to be lodged and when they need to be paid by.
If you have a system in place that prepares you for BAS time, the “red tape” process can actually be positive for you and your business.
Firstly, let me tell you a little bit about activity statements.
Activity statements are issued by the ATO so that businesses can report and pay a number of tax liabilities on the one form at the one time.
There are two types of activity statements – an instalment activity statement (IAS) and a business activity statement (BAS).
Instalment Activity Statement (IAS)
The IAS is the simpler of the two forms and is only issued quarterly.
On the IAS, the ATO tells you what your GST instalment amount is and where applicable what your PAYG instalment amount is.
There is no need to print any reports from your MYOB software or make any calculations. However, there certainly are benefits if you can accurately calculate your liability which I will explain in more detail shortly.
If the ATO considers you to be eligible for the IAS system, you will have the option to take advantage of this easier method on your September BAS – the first BAS of the financial year. If you elect this option, for each of the next three quarters you will simply be sent an amount that needs to be paid to the ATO.
If you feel the instalments advised are too much or not enough to cover your liabilities, you may vary the amounts. Alternatively you can wait until the end of the year. Any adjustments for GST will be calculated when your annual GST return is lodged and any adjustments on PAYG will result in an amount payable or refundable when your income tax return is lodged.
If you choose to pay the amount shown on the form, you do not need to physically lodge anything with the ATO. However, if you wish to vary the amount shown, you will need to lodge the form by the due date.
The instalment amounts will be payable as follows:
July – September 28 October
October – December 28 February
January – March 28 April
April – June 28 July
Business Activity Statements (BAS)
BASs are a little more complicated. They can include some or all of the following payments. Remember only those marked by an asterisk (*) are included on the IAS.
- Goods and services tax (GST)*
- Pay as you go (PAYG) income tax instalment*
- Pay as you go (PAYG) tax withheld
- Fringe benefits tax (FBT) instalment
- Luxury car tax (LCT)
- Wine equalisation tax (WET)
- Fuel tax credits
BASs are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows.
- For monthly BASs: within 21 days of the end of the month on the form
- For quarterly BASs: as above for IASs
How can IASs and BASs be good for your business?
IASs and BASs can help you keep an eye on your business finances.
Since you need to track your income and expenses to be able to calculate your GST and other liabilities on your BAS, why wait until the end of the quarter to do so?
Each and every day you are collecting money for the ATO, so why not track each week to see what your likely liability will be? Wouldn’t it be great if there were no surprises at BAS time?
Keeping it all up to date
Make sure that your MYOB accounting software is up to date and all bank feeds are imported, allocated and bank reconciliations done.
At the end of the week or month, print off the MYOB reports to prepare your BAS. Now you have an estimate of what you would have to pay should your BAS be due right now. Ideally, you should have enough money in your business bank account to cover it. (This account could also be used to set aside employee obligations such as superannuation guarantee.)
After you have printed the BAS reports, also print a Profit and Loss Statement. This will show you how much money you have made in the week or the month to date.
Here is where the magic starts. By being organised, capturing information regularly, and setting aside money by generating weekly and monthly reports, you will start to focus more on your numbers. You will gain more confidence in this area of your business and you will be more prepared when it comes to meeting your obligations – including those relating to the ATO.
It has been 16 years since GST was introduced. The more onerous tax collecting role that businesses have assumed during this time and the advancement of technology has actually afforded small business with the ability to capture financial data about their business and produce reports in real time and gain greater financial control of their business.
My tip for the new financial year is to embrace technology, use your accounting software for your own benefit (daily, weekly and monthly) and then lastly use it to produce your BAS for the ATO.