Whether you are the owner of small business or planning to start one, you’re likely to have some questions or concerns about tax and if your small business needs to lodge a Business Activity Statement (BAS). The BAS is issued monthly or quarterly, so you can report on Goods and Services Tax (GST), Pay As You Go (PAYG) instalments, PAYG withholding tax and any other tax obligations that will arise as a business owner.
How do I know if my small business needs to lodge a BAS?
Your small business needs to lodge a BAS when you have registered for GST. GST registration is required when your business’ gross income (excluding GST of 10%) is equal to $75,000 or more. It might not be necessary to register for GST in the early stage of your business but be aware that once you start earning a greater income, it becomes a legal requirement. When you register for an Australian Business Number (ABN) and GST, the Australian Taxation Office (ATO) will let you know when a BAS is due to be lodged.
It is also important to consider your type of business before submitting a BAS as requirements vary for sole traders and other business structures. The ATO website can provide you with more information on this topic.
As many business owners take a little while to get up and running, you may not need to register for GST in the early stage of your business. However, once you do start seeing a stronger turnover, it is a legal requirement to register within 21 days of your GST turnover exceeding the threshold.
A large portion of BAS is directly related to the GST component. When you lodge a BAS, you are reporting the GST amount you’ve collected on your sales minus any that you’ve paid on your purchases, with the difference being your refund or what you owe to the ATO.
Now that you’re across the basics of BAS, let’s take a closer look at how a small business is impacted by tax returns and how it can profit from them. As a small business, you may have an advantage when it comes to paying tax over larger corporations.
Tax benefits to small business
One of the great advantages of running your own business is being your own boss. You can take benefit of various tax credits and deductions that are aimed at supporting the small business owner including travel costs, educational subsidies and home repairs and maintenance. To access these benefits, you must keep legitimate records of these expenses and how they are directly related to the operation of your business. Your Arabon bookkeeper can help you to record the required transaction information and financial statements.
Business equipment and what you can claim
You are able to claim back GST on products used to conduct business, even if your own product or service is GST-free. These items include:
- Tools of Trade: may include computers, printers, internet access, software, home office expenses and stationery
- Consultants: Services external to the business that asist you in doing business including marketing, marketing costs, accounting services, financial advisers etc.
- Assets: Physical and intellectual items owned by a business
- Business Overheads: Bank fees, phone, internet, electricity and water bills, insurance premiums, legal fees and rent
- Travel: Business motor vehicle usage, business travel expenses including cost for flights and hotels, parking fees
- Work Clothing: Protective clothing, necessary outdoor gear
- Education: Technical or professional qualifications
- Employees: Salaries, wages, bonuses or allowances, super contributions for employees, some contractors.
How to lodge your BAS
The ATO makes the process of lodging your BAS relatively easy however some groundwork must be completed initially. It can be lodged online in a few simple steps. You can either submit the statement using your online accounting software, through your myGov account (only for Sole Traders), via the ATO’s online business portal or by having a registered tax or BAS agent.
What information do you need to prepare and lodge?
To make the lodgement of your BAS straightforward, the key is to keep as much documentation of your business income and expenses as possible.
- Ensure your financial records and bank statements reflect what you’re sending to the ATO including purchases, cash expenses and any money owing.
- Collect receipts and invoices for business transactions as well as receipts and invoices for any cash transactions. Use separate bank accounts for private and business purposes regardless of the size of your business.
- Keep a record how much GST you’re collecting on sales and how much you have spent on purchases.
- Keep all information about your business, its income and any employees you may have.
- If you’re using Xero, run the Bank Reconciliation Summary to check if your actual bank balance and the balance of the bank account in Xero match. If your balances don’t match, run the report to check for missing, deleted or duplicated transactions.
- Ensure you keep your records up to date with new information. You can choose to mail a hard copy to the ATO or file your BAS online through the ATO portal, or to make your life easier: have your tax agent lodge it for you.
- Pay what you owe on time or alternatively, make arrangements with the ATO for a payment plan.
Important BAS Due Dates
It is very important to lodge and pay your tax on time. This information is listed on your business activity statement. Should the due date fall on a weekend or public holiday, you have until the next business day to lodge and pay. A registered tax or BAS agent can help you lodge your activity statements. f you lodge online, you’re eligible for an extra two weeks to lodge and pay your quarterly BAS.
GST reporting and payment cycles
- Quarterly: For GST turnovers under $20 million.
- Monthly: For GST turnover of $20 million or more.
- Annually: Voluntarily registration with a GST turnover under $75,000 or $150,000 for not-for-profit bodies.
While lodging your BAS isn’t a huge task if you’re diligent with your record and bookkeeping, having an expert on your team is incredibly helpful to ensure you’re getting it right every time. Call your Arabon accountant on 1300 ARABON to learn more about how we can assist your small business with BAS lodgements or make an appointment online.