Running a successful business pushes you to put all your skills and abilities. You will learn so much on the job, make mistakes, have big wins, take big losses, and you’ll be forced to take risks you never thought you’d ever have to take.
While some of the calculated business risks payoffs, there are risks you should avoid at all costs. One such risk is being on the wrong side of the law, specifically, not having your taxes and books in order.
There are numerous tax obligations that are tied to your business from the moment you register the business, and you need to learn what they mean and how to file for such obligations and pay liabilities within the stipulated timelines and before the deadlines.
One of these obligations is the BAS tax obligation, and if you are a small business owner, BAS is one of those small business obligations that you need to stay on top of.
At the same time, you need to understand what BAS is and what it entails because some businesses are required to lodge BAS, and others aren’t.
So, let’s get started.
What is a BAS?
BAS or the Business Activity Statement can be defined as a form or statement issued quarterly or monthly for reporting of your business’ tax obligations, for example, Pay As You Go (PAYG) instalments tax, Goods and Services Tax (GST), fringe benefits tax (FBT), PAYG withholding taxes, Luxury Car Tax, as well as the wine equalisation tax, among others.
Do you need to lodge a BAS?
Although the Business Activity Statement is a requirement for most small businesses, not everyone is required to lodge BAS. Generally, the nature of your business determines where you need to lodge BAS or not.
Essentially, you are required to lodge BAS only if your business is registered for GST, which means that if you are a new business that isn’t registered for GST yet, you wouldn’t have to lodge BAS.
That said, GST registration for businesses is required for businesses whose gross income equals or exceeds $75,000 (but excluding GST value of 10%).
So, should your business be registered for GST during its initial registration?
Well, it’s not necessary to register your business for GST during the business’ early stages, but you should be ready to register for GST and lodge Business Activity Statements once your business starts bringing in more bacon. Registering for GST is a legal requirement once you gross $75,000.
Confused and unsure about how to start lodging BAS? Don’t worry because, in as much as you are required to know these things, your relevant Australian Taxation Office (ATO) will inform you about when you’ll be expected to lodge BAS. You will receive this notification when registering your business for GST and the Australian Business Number. Often, the ATO sends you the BAS automatically before the lodgement date. Once they send the notification, you’ll be required to complete and lodge it before its due date.
Besides the GST pre-qualification and submission of lodged BAS, you also need to know your business type before BAS submission. This is crucial because the requirements for BAS submissions will vary depending on your business’s structure. This means that the requirements for limited companies will differ from those of sole traders or partnerships, etc.
When do you need to lodge your BAS?
If your business isn’t registered for GST, you won’t have to worry about BAS just yet, especially if your gross income is still low. But if your income is above $75,000 and you are registered for GST, you will be required to lodge BAS.
It’s important to note that registering for GST is an option, but once you cross the threshold, you will need to register and lodge BAS from your GST sales.
For GST registration, there also is a threshold that you are required to meet, depending on the type of business you run. Here are the requirements that your business must meet to qualify and register for GST.
- Your annual business income/ turnover must be more than $75,000
- If you run a not-for-profit business, you’ll have to register for GST once the annual turnover recorded is over $150,000.
- And if you are a Rideshare or a taxi driver, you are legally required to register for GST from the day you start the business.
What if you miss the set threshold? For businesses or companies that miss the threshold, you will be required to backdate your registration for compliance purposes. But backdating isn’t enough, and you’d have to pay the total GST owed on the business goods/ services from the date that you crossed the threshold.
With GST basics out of the way, when are you required to lodge BAS?
BAS is tied to your GST registration, and you are required to lodge BAS either monthly or every quarter. As a tool that allows for reporting and payment of GST, PAYG instalments, or PAYG Withholding taxes, you need to lodge your BAS before the deadline for tax reporting and payment.
The frequency of lodging BAS is tied to your GST turnover. Below is a more specific breakdown of how to lodge BAS and the frequency of lodging the statements.
- For Quarterly BAS reports, your business should have a turnover below $20 million. Also, you’d have to lodge this quarterly BAS if your ATO hasn’t sent you a notification yet.
- For the BAS to be lodged monthly, your business should have a recorded turnover of at least $20 million.
- And for you to lodge BAS annually, you’ll be required to first register for GST voluntarily, and your business’ annual turnover shouldn’t exceed $75,000 or $150,000 if you run a non-profit.
To ensure that your data is recorded correctly, you’ll need the help of a registered BAS or tax agent.
Quarterly BAS Reporting
Even with these options, most businesses opt to lodge their BAS quarterly. For the BAS lodged quarterly, the specific due dates for lodging are as follows:
- The deadline for Quarter 1 (July, August, and September) is 28th October.
- The deadline for Quarter 2 (October, November, and December) is 28th February.
- The deadline for lodging BAS statements for Quarter 3 (January, February, and March) is 28th April
- The deadline for lodging Quarter 4 (April, May & June) BAS statements is 28th July
If you lodge your BAS online, you will be eligible for an extra two weeks during which you can lodge and pay the quarterly BAS.
Also, the later lodgement plus payment due dates aren’t applicable to the 2nd quarter because of the one-month extension provided.
Monthly BAS Reporting
As mentioned above, you can lodge your BAS monthly if your gross GST turnover for the month is at least $20 million. You’ll need to report and pay your monthly GST and lodge your BAS online by the 21st day of the next month. So, BAS for February would be due on 21st March.
For schools or associated institutions, you will be granted a deferral automatically for your December BAS, but you’ll need to lodge the deferred BAS by 21st February.
Annual BAS Reporting
The due date for the annual BAS reporting is 31st October. But if you aren’t obligated to lodge your tax returns, then the due date for reporting and paying your annual BAS is February of the following annual tax period.
As mentioned above, you should use a registered tax agent or BAS agent for the reporting. Also, the dates may differ, but it is a good idea to confirm with your agent ahead of time.
How do you change your business’ BAS reporting and payment cycles?
You may be able to change the frequency of lodging and paying BAS depending on circumstances.
If, for example, you wish to change the current BAS reporting and payment cycle, you’d want to do that early in the BAS lodgement period. So, to change the lodgement and payment period from the first month of the quarter or even at the beginning of the financial year, you can do that by starting that change immediately (the keyword here is EARLY in the cycle). Failure to do this means that the new cycle takes effect at the start of the next year or quarter.
What happens if you don’t lodge your BAS?
Understandably, there are times when you won’t be able to lodge or pay your BAS by the due date. If you anticipate delays or a complete inability to pay your BAS on time, you should talk to your BAS agent or your ATO office as soon as possible and before the deadline for the best remedies.
Basically, you are obligated to lodge and pay your BAS before the due dates, and this means that the inability to beat the deadline will attract some penalties. To avoid being penalized for the lateness in lodging and paying BAS, you could lodge in time (if you are in a position to), then lodge later. Even if working with a tax agent, your ATO should be contacted in case you are unable to lodge and pay BAS.
Note that we recommend lodging BAS even if you aren’t able to make the payment by the deadline because once your BAS is lodged, a talk with your ATO would allow you to enter into a more flexible payment plan. You could use the online payment plan estimator to work out an affordable payment plan.
The payment plan calculator also helps you determine how quickly you’d pay off the tax debt. The calculator calculates the total interest charged on the outstanding tax debt. The interest charged on the tax debt is called the general interest charge (GIC), and it’s applicable to any tax/ BAS-reported tax not paid by the deadline.
What’s the Penalty for failing to lodge BAS on time?
The penalty for failing to lodge BAS on time is referred to as the Failure to Lodge (FTL) on time penalty. This penalty may be applied if you miss the deadline for lodging tax returns, BAS reports, or statements (or even both).
The FTL penalty charged is calculated differently, depending on the size of the business.
- If yours is a small business entity, the FTL penalty will be calculated at the specific rate of One Penalty Unit for every 28 days that the tax return or BAS is overdue; to a maximum of 5 penalty units. The value of the penalty unit as recorded from 1st July 2020 is $222.
- For medium businesses, the FTL penalty will be multiplied by two. Note that the medium business entity is the business run by a medium withholder for PAYG’s withholding tax purposes or entities with current GST income or assessable income that is more than $1million but less than $20 million.
- The FTL penalty for the large entities will be multiplied fivefold. Large entities refer to the large PAYG withholders with a current GST turnover or accessible income over $20 million.
- Lastly, you have the global entities. These entities will have their base penalty amount multiplied by 500.
To avoid penalties, Solve Accounting offers comprehensive taxation and Accounting Services that ensure all the information on your BAS is accurate and lodged on time.
How do I lodge my BAS?
This is the other crucial bit about BAS.
There are different options for lodging BAS (as well as GST). These options ensure easy lodging of BAS and also ensures that you don’t miss the deadline and pay penalties/ high-interest charges.
Most businesses opt to lodge their BAS online.
How to lodge BAS online
If you wish to lodge BAS by yourself, the online option would be the most ideal for you.
Businesses that are allowed to make their quarterly BAS lodgement online are often eligible for concessions, and if you are lodging BAS without the help of a tax/ BAS agent, you will have two extra weeks to lodge and pay your BAS.
Here are the simple steps for lodging BAS online:
- Online Services (specific) for sole traders and individuals (this is accessible via MyGov). This platform also makes it easy for you to manage taxes plus the super from one place.
- The Business Portal – this is a secure ATO portal/ website set up for easy management of all your business tax affairs online.
- SRB-Enabled software – this software makes for easy and secure BAS lodgement from your payroll, accounting, or financial software. This software is often integrated with software solutions tailored for use in specific industries.
Lodging BAS via your BAS or Tax agent
For outsourced BAS services, you’ll need a registered tax agent or a BAS agent to take care of your tax matters, the agent could lodge your BAS for you. The agent could also make the payment for the business under your account using selected electronic channels.
If you choose this option, you should make sure that you can view all your statements from your business’ MyGov Inbox. You also need to make sure that you still have access to your business activity statement via the business portal or MyGov.
ATO has a list of registered agents that you could work with, meaning you don’t have to worry about unregistered/ unscrupulous agents handling your finances.
How to report NIL BAS
If your business doesn’t have any statements to report for that period and you’ve registered for GST, FBT, PAYG, etc., you’ll need to lodge the period’s BAS as NIL.
For the ‘nil’ BAS recording, you have the option of making the nil record online or by phone. To lodge nil BAS by phone, you’ll use the number 13 72 26, which is a telephony automated service that’s available 24/7. You’ll need the Business activity statement Document Identification Number (DIN) to simplify the nil lodgement via phone.
Lodging BAS by Mail
The third option for lodging BAS is via mail.
To lodge your BAS via mail, you have to mail the original and accurately completed BAS. You’ll mail it with the pre-addressed ATO envelope (this is given as part of the BAS documents’ package for your business). In case you make a mistake or miss some details on the paper ABS, you could use white-out to make the relevant changes.
If lost or if you haven’t received your paper BAS yet, you could obtain a copy of the paper ABS by calling 13 28 66.
That said, you wouldn’t have to mail the paper BAS if you are lodging BAS online.
So, how will you receive your statements?
Your BAS statement will be sent via the same channel used to lodge BAS. So, your statements will be in your Business Portal if you lodge the BAS online; and it will be sent by mail if you lodge BAS via mail.
What are the BAS Requirements?
To qualify for BAS, there are some requirements that you need to meet. But the most important thing to keep in mind is that you qualify for BAS if you are obligated to pay the following taxes – GST, PAYG for tax instalment, PAYG for tax withheld, fringe benefits tax (instalments), luxury car taxes, fuel tax, and wine equalisation taxes.
How Often Do I Have To Lodge a BAS?
You can lodge BAS monthly, quarterly, or annually.
Conclusion
If you have a small business and meet the requirements above, you should lodge BAS. If you aren’t sure what to do and how to go about BAS, the simple guide above should give you a good headstart.