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. All businesses registered for GST need to lodge a BAS. Any anxiety 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.
What is a Business Activity Statement (BAS)?
A BAS is a form that is used by the Australian Tax Office (ATO) to collect information about a business’s tax obligations. It includes GST, pay-as-you-go (PAYG) withholding, plus other taxes. Businesses, like yours, will need an Australian business number to submit a monthly or quarterly BAS to report their taxable sales and purchases and to calculate and pay any taxes owed to the ATO.
Let’s quickly look at what GST is – GST is a value-added tax that is applied to the sale of goods and services in Australia, and businesses are required to register for GST if their annual turnover is over a certain amount. When your business is registered for GST, it must charge GST on its taxable sales and claim credits for the GST paid in its taxable purchases. The amount of GST charged on sales minus the amount of GST claimed on purchases is the net GST amount, which your business must report on its BAS. If the net GST amount is positive, your business must pay the amount owed to the ATO. If the net GST amount is negative, your business may be entitled to a refund.
How Is BAS Calculated?
The Business Activity Statement (BAS) is calculated based on a business’s taxable sales and purchases. The following steps outline the process for calculating BAS:
1. Determine taxable sales
Determine the total value of all your business sales that are subject to GST. This will include all sales of goods and services that are not exempt or outside the scope of GST.
2. Determine taxable purchases
Determine the total value of all your business purchases that are subject to GST and for which a credit can be claimed. This will include all purchases of goods and services used in the course of conducting business, such as telephone, rent of commercial space, and cost of goods, excluding those that are exempt or outside the scope of GST.
3. Calculate GST on sales
Next, calculate the GST owed on taxable sales by multiplying the taxable sales by 10% (this is the current GST rate in Australia). For example, if your total business sales were $315,000, multiply this by 10% to get $31,500. This becomes your GST collected.
4. Calculate GST credits on purchases
Now calculate the GST credits on taxable purchases by multiplying the taxable purchases by 10%. For example, if your total business purchases were $54,500, multiply this by 10% to get $5,450. This becomes your GST credit.
5. Calculate the net GST amount
The net GST amount is calculated by subtracting the GST credits from the GST owed on taxable sales. If the net GST amount is positive, the business owes this amount to the ATO. If the net GST amount is negative, the business may be entitled to a refund. In our example above, subtract $31,500 from $5,450, you will record $26,050 as the net GST amount payable.
6. Complete the BAS form
Record this net GST amount on your BAS along with any other tax obligations, such as installments PAYG withholding tax, luxury car tax or fuel tax credits. You’re ready to lodge BAS – submit your completed BAS online to the ATO by the due date.
7. Pay any taxes owed
If the net GST amount is positive, your business must pay your tax liabilities to the ATO by the due dates.
The Bottom Line
If you are unsure about any aspect of your BAS or tax obligations, seek professional advice from a registered tax agent. An accountant can help you understand your obligations and ensure that you are staying compliant with tax laws.
Good business practice is ensuring your BAS is accurate, submitted on time, and that you are paying the correct amount of tax owed to the ATO. If you think this is something your business is going to struggle with (and you’re not alone!) get on the line with SJB Bookkeeping to help you with your BAS!