As a business owner or manager in Australia, one of the most crucial responsibilities you’ll encounter is managing your Business Activity Statement (BAS). Having an Australian business number (ABN) is essential for registering for GST and receiving a BAS automatically when it’s time to lodge.

These regular tax obligations are fundamental to running a compliant and successful enterprise. In this comprehensive guide, we’ll delve into the intricacies of BAS payments, their significance, and strategies to streamline the process.

What is a Business Activity Statement (BAS) Payment?

Business activity statements (BAS) require periodic payment and reporting to the Australian Taxation Office (ATO), which includes various taxes and obligations. Paying BAS correctly and on time is essential to avoid penalties and ensure compliance.

A BAS is a consolidated statement allowing businesses to report and pay their tax liabilities, including Goods and Services Tax (GST), Pay As You Go (PAYG) instalments, PAYG withholding tax, and other relevant taxes.

The primary components of a BAS payment are:

1. Goods and Services Tax (GST)

GST is a 10% broad-based tax applied to most goods and services sold in Australia. Businesses must collect GST from their customers and remit the net amount (GST collected minus GST paid on business purchases) to the ATO through their BAS.

Businesses may also be eligible for fuel tax credits, which can be claimed through the BAS.

2. Pay As You Go (PAYG) Withholding Tax

Employers are required to withhold a portion of their employees’ salaries or wages as income tax and remit this amount to the ATO through their BAS. This system ensures that employees meet their income tax obligations throughout the year.

3. PAYG Instalments

Pay As You Go (PAYG) instalments are periodic prepayments towards a business’s expected income tax liability for the year. Unlike the common misconception that PAYG instalments are based on annual turnover, they are actually determined by the income and profits reported in the latest lodged tax return.

If your business paid more than $1,000 in taxes in the most recently lodged tax return, you will likely be automatically registered for PAYG instalments by the Australian Taxation Office (ATO). This ensures that businesses make regular payments towards their anticipated tax obligations, helping to avoid a significant lump sum payment at the end of the financial year.

4. Other Taxes and Obligations

Depending on the nature of your business, your BAS may also include other taxes and obligations, such as Fringe Benefits Tax (FBT), Wine Equalisation Tax (WET), or Luxury Car Tax (LCT).

Importance of BAS Payments

Complying with BAS payment obligations is important for several reasons:

1. Legal Requirement: Failure to lodge and pay your BAS on time can result in penalties and interest charges from the ATO, which can quickly accumulate and become a significant financial burden. The Australian Tax Office (ATO) manages BAS payments, which are substantial in Australia’s economic landscape.
2. Cash Flow Management: By regularly reporting and paying your tax obligations, you can better manage your business’s cash flow and avoid unexpected large tax bills.
3. Accurate Record-Keeping: The BAS process encourages businesses to maintain accurate and up-to-date financial records, essential for effective business management and decision-making.
4. Tax Planning: Regular BAS reporting provides valuable insights into your business’s financial performance, allowing you to identify opportunities for tax planning and minimisation strategies.

Lodging and Paying Your BAS with the Australian Taxation Office

BAS lodgment and payment frequency depend on your business’s annual turnover and reporting cycle. Most small businesses are required to lodge and pay their BAS quarterly, while larger companies may need to do so monthly. 

There are several options for lodging and paying your BAS, and using online services provided by the ATO to lodge business activity statements can offer significant benefits, such as convenience and security:

1. Online through the ATO Business Portal: The ATO’s portal allows you to lodge and pay your BAS electronically, making it a convenient and secure option.
2. Through Accounting Software: Many accounting software packages, such as Xero, MYOB, and QuickBooks, offer integrated BAS lodgment and payment features, streamlining the process.
3. Paper BAS Form: While less common, you can still lodge and pay your BAS using a paper form, which you can obtain from the ATO or a tax agent.

It’s important to note that BAS payments are due on the 21st day of the month following the end of your reporting period. For example, if your quarterly BAS period ends on March 31st, your BAS payment would be due on April 21st.

Why is My BAS So High?

If you’ve noticed that your BAS payment seems unusually high, there could be several reasons behind it:

1. Increased Sales or Revenue

One of the primary reasons for a higher BAS payment is an increase in your business’s sales or revenue. As your sales increase, the amount of GST you collect from customers also rises, resulting in a higher net GST liability to be remitted to the ATO through your BAS.

2. Changes in Expenses or Purchases

If your business has experienced a decrease in expenses or purchases during the BAS period, it can lead to a higher net GST liability. This is because you’ll have less GST credits (GST paid on purchases) to offset against the GST collected from sales.

3. Timing of Expenses or Purchases

The timing of when you incur expenses or make purchases can also impact your BAS payment. If you’ve made significant purchases or incurred expenses towards the end of the BAS period, you may not be able to claim the GST credits until the next BAS period, resulting in a higher net GST liability for the current period.

4. Adjustments or Corrections

If you’ve made adjustments or corrections to previous BAS periods, such as correcting underreported sales or overreported expenses, it can result in a higher BAS payment for the current period.

5. Changes in Tax Rates or Regulations

Any changes in tax rates or regulations, such as an increase in the GST rate or changes to tax laws, can directly impact your BAS payment. It’s essential to stay informed about any updates and adjust your calculations accordingly.

6. Incorrect Calculations or Reporting

Errors in calculating or reporting your sales, purchases, or expenses can lead to an inaccurate BAS payment. It’s crucial to double-check your calculations and ensure that all transactions are correctly recorded and reported.

7. Seasonal Fluctuations

For businesses that experience seasonal fluctuations in sales or expenses, the BAS payment can vary significantly from one period to another. During peak seasons, when sales are higher, you may notice a higher BAS payment.

If you’re concerned about a higher-than-expected BAS payment, review your financial records, sales, and expenses carefully. Identify any unusual transactions or changes that may have contributed to the increase.

8. Wages & PAYG Withholding for Employees and Directors

When paying high wages to employees and directors, businesses must withhold a portion of these wages and remit them to the ATO through PAYG withholding. High-wage earners may face tax obligations exceeding 45%, which can strain cash flow, especially if the business is not generating substantial profits.

To manage finances effectively, consider:

• Reviewing wage structures and adjusting remuneration for owners and directors if necessary.
• Exploring tax-effective compensation methods, such as fringe benefits or employee share schemes.
• Seeking professional advice to develop a tax-efficient wage strategy that complies with ATO regulations. Box Advisory Services can also help you with this aspect.

 If you’re unable to pinpoint the cause, consider seeking assistance from a qualified tax professional or accountant to ensure compliance and identify potential areas for improvement or optimisation.

Strategies for Effective BAS Management

Managing your BAS payments effectively can minimise stress, avoid penalties, and ensure compliance with tax obligations. Here are some strategies to consider:

1. Keep accurate records of all transactions.
2. Regularly review your financial statements.
3. Set aside funds for your BAS payments.
4. Seek assistance from a registered tax agent or BAS agent. A registered tax agent or BAS agent can help you navigate the complexities of the tax system, submit, vary, and provide help with BAS lodgment on your behalf.
   

1. Maintain Accurate Records

Keeping accurate and up-to-date financial records is crucial for preparing your BAS. Invest in a reliable accounting system or software that can track your sales, purchases, and expenses, making it easier to calculate your tax liabilities.

2. Set Reminders

Set reminders for your BAS due dates to ensure you get all the payments. Many accounting software programs and calendar applications offer reminder features to help you stay on top of your obligations.

3. Seek Professional Assistance

If you find the BAS process overwhelming or complex, consider seeking the assistance of a qualified tax professional or accountant. They can guide you through the process, ensure compliance, and identify tax minimisation strategies.

You can also refer to the Tax Practitioners Board to find a registered tax or BAS agent who can lodge, vary, and pay on your behalf through their preferred electronic channel.

We can help! Contact us now for a free consultation.

4. Utilise Cash Flow Management Strategies

Effective cash flow management is essential for meeting your BAS obligations. Consider strategies such as invoicing promptly, offering incentives for early payments, and managing your expenses carefully to ensure sufficient funds are available when your BAS is due.

5. Take Advantage of Tax Minimisation Strategies

Work with your tax professional or accountant to identify legitimate tax minimisation strategies that can help reduce your overall tax burden. These may include claiming eligible deductions, utilising tax concessions, or structuring your business tax-efficiently.

6. Stay Updated on Changes

Tax laws and regulations are subject to change, so staying informed about any updates or amendments that may affect your BAS obligations is essential. Make sure you’re aware of any news by asking your accountant for advice and having your tax planning reviewed regularly. 

Key Takeaways:

• Business Activity Statements (BAS) require periodic payments and reports to the Australian Taxation Office (ATO) covering various taxes and obligations, such as GST, PAYG withholding tax, PAYG instalments, and other relevant taxes.
• Pay BAS correctly and on time to avoid penalties and ensure compliance with tax obligations is crucial.
• BAS includes components such as GST, PAYG withholding tax, PAYG instalments, and other taxes and obligations depending on the nature of the business.
• Compliance with BAS payment obligations is crucial due to legal requirements, cash flow management, accurate record-keeping, and tax planning.
• The frequency of BAS lodgment and payment depends on the business’s annual turnover and reporting cycle, with options for lodging and paying online through the ATO Business Portal, accounting software, or a paper BAS form.
• BAS payments are due on the 21st day of the month following the end of the reporting period.
• Strategies for effective BAS management include keeping accurate records of all transactions, regularly reviewing financial statements, setting aside funds for BAS payments, and seeking assistance from a registered tax agent or BAS agent.