The Basics of BAS
The Spotz Guide for Sellers
The Basics of BAS
When you’re the owner of a small business, taxes are part of the ball game – and for many entrepreneurs, this can be an especially intimidating aspect of running a business. Not to worry – this guide will spell out the basics of what you need to know about Business Activity Statements (BAS).
First off, you’ll naturally wonder: Does this even apply to me? The answer depends on the size of your business – in Australia, when your business’ gross income exceeds $75,000 in a tax year. If it does, you’re required by the ATO to register for GST, which means that you also submit a BAS quarterly (or monthly, if revenue exceeds $20M annually – not a problem for most small businesses!)
So, if you’ve got a GST registration, what’s the point of a BAS?
Great question – a BAS is actually a way of saving business owners some tax. By lodging a BAS, you’re reporting the total amount of GST that has been paid to your business, less the GST that you paid in the course of operating your business. Essentially, the point of the BAS is two-fold: It confirms the amount of tax collected, and allow you to avoid being ‘taxed twice’ by deducting tax incurred on business costs.
Lodging your BAS is actually quite straightforward. If you’re a sole trader, you’ll be able to submit your BAS directly from your accounting software through to your MyGov account. If your business is more complex, that’s ok! The ATO’s business portal is another submission portal for those looking to do it themselves – and of course, you’ll also be able to submit through a registered tax agent, or a BAS agent.
Here’s what you need:
- Check that your own financial records match the figures that you’re sending to the ATO. You’ll want to include revenue, expenses (including cash expenses!) as well as any debt that you’ve incurred in the operation of your business.
- Collect all receipts and relevant records to your expenses so that you can prove these. If you want to make deductions, or GST claims, you will need these for proof.
- GST records – how much GST has your business collected, and how much has it spent on GST for business purchases?
- Submit your BAS, and make any relevant payments to the ATO. If you’re a bit short on cash, and you can’t pay in full, remember that payment plans are available – the fine folks at the ATO are professionals who will help you!
Essentially, the biggest hurdle with BAS for business owners is record keeping! Stay on top of your receipts and revenue, and this task will be surmountable.
Tips For Claiming GST back:
- The Golden Rule: If you use it for your business, and you paid GST to get it – you can claim that GST back.
- The Second Golden Rule: Keep your receipts! The amount of GST your business can claim back is often substantial – it will make a big difference to your bottom line come tax time.
- Check the ATO website for specific and general deductions allowable by your business. Many business owners don’t spend the time, and it’s a mistake – there are considerable savings to be had here, and it’s easy!