What is a BAS and Do I Need To Lodge One?
What is a BAS (Business Activity Statement) ?
Are you wondering what a BAS is, and what that means for you; Dear Business Owner? Look no further. We will explain what you need to know. And how we can help you, if that sounds good to you. Off The Hook Bookkeeping deals with BAS every Quarter, so we have some insight on them 🙂
BAS is an acronym for Business Activity Statement. It’s all about forwarding GST (Goods and Service Tax) you’ve collected when making sales, to the ATO (Australian Tax Office). You can read more about How GST Works on the ATO website. Otherwise read our version below!
It’s also for reporting and paying Pay As You Go taxes for yourself and your staff. But let’s talk about GST first….
What is the GST (Goods and Service Tax) ?
GST is a 10% tax that is charged on Goods and Services. It’s added on top of your invoices, but it’s not your money! It needs to be paid forward to the ATO if you have earned over $75,000+GST annually. If you earn less than that, you don't have to register for, or forward on any GST. But you can’t collect it either. That would be a no no!
When you report your GST on sales, you’re also allowed to reduce that GST by the amount of GST you PAY OUT on your purchases and expenses.
So here’s an example using made up figures!
Let’s say for the current quarter you’ve made $33,000 in total sales and $15,000 in total purchases. $11,000 of your purchases had GST on them. And the other $4,000 did not.
Your BAS would look like this:
Net Sales $30,000
+ 10% GST $3,000
Gross Sales $33,000
Total Purchases $15,000
Net Purchases $10,000
+ 10% GST $1,000
Total purchases with GST $11,000
+ Purchases with No GST $4,000
Total purchases $15,000
GST on Sales $3,000
Less GST on Purchases $1,000
Total GST Payable to ATO $2,000
What is PAYGW (Pay As You Go Withholding) ?
Another purpose of a BAS is Withholding tax from wages. Which means telling the ATO about your employees wages and withheld tax PAYGW. And the tax contributions you make towards your own taxable income PAYGI.
PAYGW is Tax withheld on your employee wages; it stands for Pay As You Go Withholding. And it’s calculated using sliding scales of tax. It can be a bit tricky to calculate it yourself but your bookkeeper can help you, or you can calculate it on the ATO website.
PAYGI is a tax installment towards your own taxable income; it stands for Pay As You Go Installment. It’s calculated by the ATO after you lodge your first tax return, so you don’t get surprised with a big tax bill at the end of the financial year.
When your BAS becomes available, the instalment will already be pre-populated on the form. So you can make your payment each quarter. So continuing on with the past example, let’s add in your PAYG. Let's say the ATO estimated your annual tax to be $3,000 per year. You’ll then pay ¼ of that every BAS, $750 per quarter as PAYGI.
And let’s say you’ve got one employee who is paid $500 per week x 13 = $6,500 per quarter. You’ve checked the PAYG Withheld Calculator, and so you withhold $36 per week x 13 – $430. You would pay your employee $6070 into their bank account. And save the $430 in a savings account until you forward it to the ATO with your BAS.
Total Wages $6,500
Net Wages $6,039
+ PAYGW $430
+ PAYGI $750
Now let’s add up your BAS!
Taking the total GST Payable $2000 from the first example, we’re going to add on the PAYG amounts.
Total GST Payable $2000
+ PAYGW $430
+ PAYGI $750
Total BAS due $3,180
Hopefully this has been helpful in explaining what is a BAS and how to calculate what the BAS payment is. And helped you to see that if you earn over $75K you MUST start lodging a BAS every quarter! But even if you earn less, as soon as you have employees you must also lodge a BAS.
So What is an IAS then?
As your business grows, you might decide to report your PAYGW more often, to make sure you don’t spend the money! But remember, that monthly lodgements mean higher bookkeeping fees, as you pay per lodgement.
Once your PAYGW reaches $25,000 per month you MUST lodge an IAS (Installment Activity Statement).
If you were being pessimistic, you could say that BAS Lodgement is simply something you have to do (a requirement), for the sake of someone else (The Australian Government), otherwise you'll get in trouble (fines, etc)….
Whilst all that is technically correct, a BAS is actually a really helpful tool that helps you to keep track of how your business is performing.
Why would you leverage the compiled information that a BAS Lodgement requires? Because the information will show you what you can fix to get your business fighting fit and ready for success!
Why is keeping track of how my business is performing worth my time?
The easiest example I can give is with our bodies and our health. We all have bodies, and are inundated with information about the benefits of being healthy, and how to do it. So that makes an excellent illustration for your business health. Being healthy, fit and a certain weight for our body structure will help us in many ways. When we know what our weight should be, we know if we can eat a portion, or two… of Vanilla Slice, or whatever it is that you enjoy. But when you know you are heavier than you should, you don't get to relax and enjoy all that custardy goodness.
You might eat that Vanilla Slice, but there is that nagging in the back of your mind that wrecks it. Likewise, when your business is doing badly financially, spending money that you don't have yet, or is owed to someone else, you don't have the freedom to buy the things that you want or need, with freedom. Or worse yet, you might literally not be able to buy things that you want or need, because your credit card or bank account won't allow it!
Or you might have taken your foot off the accelerator, because you thought everything was in better shape than it was. But had you known, you would have simply done some work in those areas, and got the work done that you needed to. Had you known you needed to walk 20 minutes a day, you actually could have. But you didn't, and now that time has passed, you now need to take medication so you don't have a higher risk of heart attack, etc.
Our conclusion on What is a BAS? ~ The take home:
It is often lack of knowledge that is the real issue. Business owners are often a can do kind of people. A business will fail because of ignorance, far more than lack of effort. So you need to know where to give your attention to, so you can do the exercise required to keep everything healthy. By successfully doing your BAS, you can then infer from that where you need to give your attention to.
By knowing how your business is going, you can do what is needed to keep your business successful.
Address the areas that need correcting. And get rid of areas that are simply money sinks. Also you can focus on the areas that are performing well.
By accurately preparing and lodging your BAS, you can then use that information to transform you business.
Different personality types make decisions with different motives.
There are all different sorts of Business Owners. Whether you are selling Hardware and Outdoor Furniture, or provide a service such as Plumbing, or are a creative type who makes Wedding Accessories, you need information based on data. Your intuition, or consulting within your family, etc. are all legitimate places to draw decisions from. However, that needs to be coloured by the concrete reality that is literally going on in your business.
It is fine to have your head in the clouds (being a Dreamer or Visionary), but you also need your feet on the ground (dealing with what is happening in your accounts) too.
The information a BAS preparation gives you will help you to target your strengths, and address your weaknesses.
That is our take on What is a BAS. Over to you….
I hope you have enjoyed our blog post about what is a BAS, and found it useful. By clarifying what a Business Activity Statement is, and how it can help your business to not only survive but indeed thrive, you are now armed and ready for action!
If we sound like the Bookkeeping Business that would fit your BAS Lodgement requirements, please get in touch. And we also do regular Bookkeeping, Payroll, Business Advisory, and more.
We look forwards to hearing from you.
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Thank you for your time, and enjoy the serenity!