Business Activity Statements (BAS) | The Profitable Bookkeeping Business

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In this article, we are going to be looking at business activity statements (BAS) - what they are, why businesses and companies need to complete one, and what some of the legal and tax compliance obligations are when it comes to business activity statements (BAS). We are also going to be looking at the different sections in a business activity statements (BAS) and how businesses and companies should fill one out in more detail.

What is a business activity statement (BAS), and who needs to prepare one?

A business activity statement (BAS) is a government form and type of financial report that all businesses and companies that are registered for goods and services tax (GST) must fill out.

Businesses and companies must register for goods and services tax (GST) when their GST turnover per year exceeds $75,000 per financial year. The goods and services tax (GST) turnover is calculated based on the business or company’s gross income, minus GST. What this means is that many smaller businesses who do not earn in excess of $75,000 per year will likely not need to prepare and lodge business activity statements (BAS).

However, some businesses and companies may still decide to register for goods and services tax (GST) before they exceed this threshold, if they expect that they may exceed this threshold in future. In this situation, if a small business or company has decided to voluntary register for goods and services tax (GST), they will still need to complete and lodge business activity statements (BAS).

Businesses and companies who are registered for goods and services tax (GST) will need to lodge a business activity statement (BAS) every reporting period, even if they have nothing to report for that particular period. In this situation, they are required to lodge what is known as a “nil” business activity statement (BAS), which basically denotes their income and taxes as zero.

How often do businesses and companies need to complete a business activity statement (BAS)?

Depending on the size of the business or company, the scale of their operations, and the amount of income that they generate, they may be required to fill out and lodge a business activity statement (BAS) at one of the following three reporting frequencies:

Monthly (if the business or company’s turnover is $20 million or more)
Quarterly (if the business or company’s turnover is less than $20 million)
Annually (if the business or company is voluntarily registered for good and services tax - GST, and their annual turnover does not exceed $75,000)

Most small businesses and companies will be required to lodge quarterly business activity statements (BAS) (every three months), whereas most larger businesses and companies are likely to be on a more frequent monthly lodgement schedule.

Why do businesses and companies need to complete a business activity statement (BAS)?

Businesses and companies who are registered for goods and services tax (GST) are required to fill out and lodge business activity statements (BAS) to report their income and taxes. Some of the information reported in a business activity statement (BAS) will include:

The amount of goods and services tax (GST) collected (that is, the 10% tax that businesses and companies are required to collect and pay to the Australian Tax Office - ATO on most goods and services sold and consumed within Australia)
Pay as you go (PAYG) withholding (that is, the amount of tax that you are required to withhold from payments made to your employees, as well as to contractors and other businesses who do not supply their Australian Business Number - ABN)
Pay as you go (PAYG) income tax instalments (that is, regular payment instalments that make it easier for businesses and companies to manage and pay the amount of income tax that they owe)
Fringe benefits tax (FBT) instalments (that is, the amount of tax payable on other benefits that a business or company provides to their employees, on top of their regular wages or salary)

For certain types of businesses and companies, a business activity statement (BAS) may also require them to report things like:

Luxury car tax (LCT) (a 33% tax that is charged on cars with a goods and services tax (GST) inclusive value above a certain threshold, which must be paid by businesses or companies that purchase or sell luxury cars)
Wine equalisation tax (WET) (that is, a tax applied at the rate of 29% on the wholesale value of wine, which is payable by any business or company who makes, imports, or wholesales wine)
Fuel tax credits (a type of credit that businesses and companies can receive for the fuel tax that is included in the price of fuel for machinery, plant, equipment, and vehicles)

The business activity statement (BAS) consists of several fields that require the business or company to record the amount for each of the above items.

The information that the business or company records on this form will then allow them to make payments of the relevant taxes payable, to ensure they remain financially and legally compliant, and that they are paying the right amount of tax to the Australian Tax Office (ATO) for the amount that they are earning.

What are the different sections of a business activity statement (BAS)?

On a business activity statement (BAS), there will be seven main sections (or “labels”) that a business or company is required to report under - one for each of the types of taxes that we discussed in the previous section. Let’s look at each of these sections again now in more detail, in terms of the type of information that you will be required to report under each one:

Goods and services tax (GST): This section requires businesses and companies to report the amount of goods and services tax (GST) they have collected. Under this section, businesses and companies will have the opportunity to claim a credit for the amount of goods and services tax (GST) that they have paid, and also to make payment for any outstanding goods and services tax (GST) that they owe the Australian Tax Office (ATO).
Pay as you go (PAYG) withholding: This section requires businesses and companies to report the amounts of tax that they have withheld from payments made to their employees, contractors, or other businesses. This section also allows businesses and companies to pay the required amounts to the Australian Tax Office (ATO).
*Pay as you go (PAYG) income tax instalments:*This section requires businesses and companies to calculate the amount of income tax that they owe, based on the amount of income that they have generated through their business activities carried out during the reporting period. This section also allows businesses and companies to pay the required amounts to the Australian Tax Office (ATO).
*Fringe benefits tax (FBT) instalments:*If a business or company has paid its employees more than $3,000 in fringe benefits in the past financial year, they are required to complete this section to report the total amount paid in fringe benefits and make payment of the required taxes.
Luxury car tax (LCT) and wine equalisation tax (WET): These sections require the business or company to calculate and report the amounts payable and refundable, and to make the necessary payments on any tax payable.
Fuel tax credits: This section allows the business or company to calculate and claim the amount of credits that they are owed.

It is worth noting that when preparing a business activity statement (BAS), you are only required to fill out the sections that apply to you. This means that, for example, if things like luxury car tax (LCT) and wine equalisation tax (WET) do not apply to you, you do not need to calculate or fill these out. However, rather than leaving them blank, any sections that do not apply should have a zero entered into them.

Another tip that you should know for filling out a business activity statement (BAS) is that all amounts need to be entered as a whole dollar amount. This means leaving out any extra cents, and rounding down (rather than up) to the nearest dollar.

How do you fill out a business activity statement (BAS)?

In the previous section, we looked at what some of the key sections (or “labels” are that you will find on a business activity statement (BAS). In this section, we will be looking at how to fill out some of these sections in more detail.

For the purposes of this article, we will be focusing on goods and services tax (GST), pay as you go (PAYG) withholding, pay as you go (PAYG) income tax instalments, and fringe benefits tax (FBT) instalments, as these are the sections that most businesses or companies are likely to need to fill out or report on. However, for more specialised businesses or companies who are required to report on things like luxury car tax (LCT), wine equalisation tax (WET), or fuel tax credits, a bookkeeper or accountant with experience in calculating and reporting these types of taxes will be best-placed to advice.

Goods and services tax (GST)

Goods and services tax (GST) is a 10% tax that is added to the cost of most goods and services sold and consumed within Australia. Businesses and companies that are registered for goods and services tax (GST) are required to collect this 10% on all eligible sales that they make, and remit this amount as a payment to the Australian Tax Office (ATO) each time that they file their business activity statement (BAS).

Goods and services tax (GST) is calculated as 10% of the sales price of a particular good or service. For example:

Let’s say a particular business or company sold a product for $100. $100 x 10% = $10 Therefore, the regular sales price + GST is $100 + $10 = $110.

So, $110 would be the total sales price with GST included, with $10 being the GST portion of this that the business or company is required to remit and pay to the Australian Tax Office (ATO).

Pay as you go (PAYG) withholding

Pay as you go (PAYG) withholding refers to the amount of tax that you are required to withhold from payments made to your employees, as well as to contractors and other businesses who do not supply their Australian Business Number (ABN) to you.

The process of calculating pay as you go (PAYG) withholding can be quite a complex one, as it takes into account a range of different factors on an individual employee level - for example, their income tax bracket, Medicare levy liability, study loans, and whether or not they can claim the tax-free threshold. Because these things are all things that can vary significantly from employee to employee, unlike some of the other taxes on this list, there is no one calculation that can be used to calculate pay as you go (PAYG) withholding.

With that said, the Australian Tax Office (ATO) has a range of resources available to assist businesses and companies to accurately calculate the amounts of tax that they are required to withhold from their employees and contractors. This includes these tax tables (which can be used by businesses and companies to work out how much tax to withhold from their employees), as well as an online tax withheld calculator. This online calculator can be a very useful tool for businesses and companies, as it allows them to enter in things like the frequency at which the employee is paid, their gross weekly earnings, their tax status, Medicare levy status, and whether they are claiming any offsets or exemptions to provide a more accurate calculation of the amount of tax to be withheld for each employee.

Pay as you go (PAYG) income tax instalments

Just as with the previous section on pay as you go (PAYG) withholding, when it comes to pay as you go (PAYG) income tax instalments, there is really no hard and fast rule that can be used to calculate a business or company’s income tax obligations. Rather, this calculation is something that will depend significantly on the business or company’s current income, as well as its income in the previous financial year.

Initially, the Australian Tax Office (ATO) will calculate pay as you go (PAYG) income tax instalments for all businesses and companies based on the information they lodged in their previous tax return. This option involves calculation based on an “instalment amount”, which is basically a flat rate calculated by the Australian Tax Office (ATO) based on your last tax return. With this, businesses and companies will be notified each reporting period of the amount that they are due to pay.

For example, if a business or company had a total income of $50,000 last year, they would have been required to pay $12,500 in taxes to the Australian Tax Office (ATO). If pay as you go (PAYG) income tax instalments are being calculated for this business or company using the “instalment amount” method, they may be required to pay $3,125 per quarter as their PAYG contribution to reflect their income and taxes during the previous financial year.

Businesses and companies do have the option of switching to an “instalment rate” method of calculating their pay as you go (PAYG) income tax instalments. For some businesses and companies, this option may enable a more accurate calculation of their likely income and tax liabilities, as it allows them to calculate their own pay as you go (PAYG) instalment based on their actual income during the relevant reporting period, rather than relying on their income during the last financial year. Using this method, the business or company’s actual income is then multiplied by a rate set by the Australian Tax Office (ATO) to arrive at the instalment payable.

Fringe benefits tax (FBT) instalments

Fringe benefits tax (FBT) is a type of tax that employees are required to pay on any benefits that they pay to their employees on top of their regular wages or salary.

It is calculated based on the taxable value of the benefits being provided. This taxable value equates to the gross income that the company’s employees would need to earn at the highest marginal rate to purchase or pay for the benefits themselves. Fringe benefits tax (FBT) is taxed at a rate of 47%.

As an example of how fringe benefits tax (FBT) would be calculated:

Let’s say a particular company or business provides one of its employees with a company car, which costs $25,000 (including $2,500 GST). To calculate the fringe benefit tax (FBT) for the company car, this could be expressed as: Taxable value x gross-up rate x fringe benefit tax (FBT) rate (Note: The gross-up rate is set at 2.0802 for expenses with GST included, and 1.8868 for expenses with no GST). So, $25,000 x 2.0802 x 47% = $24,442.35.

In addition to the above, there are a few other things that businesses and companies should keep in mind when they are filling out and lodging a business activity statement (BAS). The following tips are some things that businesses and companies can do to ensure that they are reporting their income and tax liabilities correctly and accurately on their business activity statement (BAS):

Keeping adequate records (including of all sales, income, expenses, fees, wages, and other business costs)
Reconciling their income and expenses with their bank statements to ensure everything adds up
Ensuring that all of their accounts and financial records are complete and up-to-date
Generating profit and loss statements and balance sheets to assist them in the reporting process
Ensuring they are clear around what can or can’t be claimed as a goods and services tax (GST) credit
Using electronic accounting systems (such as Xero or MYOB) to help prevent manual errors that can result from human calculation
Seeking the advice from a professional accountant, bookkeeper, or BAS agent if they are unsure about anything (rather than guessing or risking reporting their financial information inaccurately)

Business activity statements (BAS) will be sent out to goods and services tax (GST) registered businesses and companies around two weeks prior to the end of the current reporting period. For businesses and companies that report quarterly, these reporting periods are as follows:

Quarter 1 (July - September)
Quarter 2 (October - December)
Quarter 3 (January - March)
Quarter 4 (April - June)

It is the responsibility of the business or company to ensure that the complete and lodge the business activity statement (BAS) by the relevant due date. BAS agents submitting Bas on behalf of companies have a different lodgement date. For a quarterly reporting schedule, these due dates are as follows:

BAS Cycle	Original Due Date	BAS Agent Concession for Lodgement and Payment if Lodging by Online Services for Agents or PLS
Quarter 1 -	28-Oct	25-Nov
Quarter 2 -	28-Feb	28-Feb
Quarter 3 -	28-Apr	26-May
Quarter 4 -	28-Jul	25-Aug

There are a few different ways in which businesses and companies can lodge their business activity statements (BAS). They can do this themselves;

online through the Australian Tax Office’s (ATO) Online Services for Business portal (for companies),
through MyGov (for sole traders), or;
through their preferred Standard Business Reporting (SBR) software,
They can also do this on a paper form that is mailed to the Australian Tax Office (ATO),
or by phone if they have a “nil” result.

Alternatively, they may prefer to go via a registered tax or BAS agent (such as an accountant), who can prepare and lodge this form on their behalf.

Why is it important that businesses and companies fill out their business activity statement (BAS) accurately?

There are a number of reasons why it is important that businesses and companies complete their business activity statements (BAS) correctly. Just as with any other kind of financial reporting, clear, complete, and accurate reporting is essential to ensure:

That the business or company is meeting all of its legal and financial compliance and reporting obligations
That the business or company has complete, up-to-date, and accurate financial records
That the business or company has a clear picture of its current financial position
That it ensures the business or company is taxed at the correct rate, and pays the right amount of income tax (which can also help it to avoid a huge tax bill or maximise its chances of receiving a refund at the end of the financial year)
That it can provide the business or company with the financial insights it needs to meet its other obligations (e.g. PAYG withholding)
That it promotes transparency about the business or company’s financial affairs - for example, to stakeholders and investors with an interest in how the business or company operates

Some businesses and companies choose to complete their own business activity statements (BAS), particularly if they carry out business activities on a small scale, do not generate a lot of income, or do not have an accountant or bookkeeper who they work with on their finances. For businesses and companies who choose to complete their own business activity statements (BAS), it is essential to have a thorough understanding of how to complete one, including how you calculate and report different amounts under each section of the statement. For example, the business will need to be able to calculate and report amounts such as their total sales, total expenses, and total amount of goods and services tax (GST) they have collected during the reporting period.

Where the business or company does not have the financial understanding necessary to accurately fill out their own business activity statement (BAS), or where they carry out business activities on a large scale or generate a large amount of income, they may prefer to work with an accountant or bookkeeper to prepare this financial report. Licenced accountants and bookkeepers can help businesses and companies to calculate their total income, total expenses, and total goods and services (GST) paid accurately, to ensure that these amounts are reflected accurately in the report. This can help to reduce the risk of errors or inaccuracies and ensure that the business or company’s business activity statement (BAS) paints as true a picture of their financial position and activities as possible).