A Guide to GST and BAS Reporting
For entrepreneurs and business owners, understanding the ins and outs of GST and BAS reporting is essential not only for staying compliant but also for ensuring the process is an efficient one.
So, what do you need to know?
What is Goods and Services Tax (GST)?
Goods and Services Tax (GST) is a tax on most goods and services in Australia. It’s a consumption tax paid by consumers, but collected and remitted to the government by businesses. The standard GST rate is set at 10%, although certain items might be exempt or reduced.
Businesses that have an annual turnover of $75,000 or more (or $150,000 or more for non-profit organisations) are required to register for GST. Once registered, these businesses must charge GST on their sales, collect it from customers, and remit it to the Australian Taxation Office (ATO). Businesses can also claim back GST credits on their purchases.
To ensure that the correct amount of GST is remitted to the ATO, and to claim GST credits on purchases, businesses need to lodge regular Business Activity Statements (BAS).
What is a Business Activity Statement (BAS)?
A Business Activity Statement (BAS) is a comprehensive report detailing a business’ tax obligations, including GST, pay-as-you-go (PAYG) withholding tax, PAYG instalments, and more. The BAS serves as a vital tool for the ATO to track tax compliance. Typically, businesses need to lodge their BAS on a monthly or quarterly basis, depending on their turnover and other factors.
BAS outlines information about a business’ sales and purchases in order to calculate the business’ tax liability. In the case of a business’ GST liability, this is calculated based on the difference between the GST collected on sales and the GST credits claimable on purchases.
You will have to decide whether you’ll use the cash or accruals method for BAS reporting. The cash method records transactions when the money is received or paid, while the accruals method records transactions when invoices are issued or received. You will also need to decide whether you lodge your BAS every month or every quarter. Your bookkeeper or accountant can advise on which will best suit your business.
How can you stay on top of BAS reporting?
It’s important to lodge BAS on time to ensure you’re compliant and can avoid penalties. Here are some ways to streamline the process:
Keep accurate records: The foundation of seamless BAS reporting lies in maintaining meticulous records. Every transaction, whether a sale or a purchase, must be documented accurately. This includes invoices, receipts, and other relevant documents.
Leverage software and technology: Embrace technology to simplify your reporting process. There are numerous accounting software options such as Xero available that can help you track your income, expenses, and GST obligations efficiently.
Lodge and pay on time: Consistency is key when it comes to submitting your BAS. Missing deadlines can lead to penalties and fines. Setting up reminders and maintaining a regular lodgment and payment schedule can help prevent unnecessary hiccups.
Reconcile your accounts: Regularly reconcile your financial records with your BAS statements to identify any discrepancies. Promptly address any inconsistencies to avoid complications down the line.
Seek professional advice: Working with a registered BAS agent to handle your BAS will ensure the calculations are accurate and you remain compliant.
Classify GST-free transactions correctly: There is a difference between items that are GST-free and those that are exempt. While both categories don’t attract GST, they have distinct implications. Make sure you classify transactions accurately.
What are the consequences of non-compliance?
If you fail to comply with BAS reporting requirements it can result in serious financial repercussions, audits or legal action. Non-compliance can include late lodgment and payment, incorrect information, or underpayment of GST.
If you’re struggling to pay a BAS debt, it’s a good idea to look into whether it may be possible to move to a payment plan. The ATO will often be quite flexible, enabling you to pay in instalments over several months, and often without incurring any interest.
Ensuring you have a good handle on GST and BAS reporting is essential for keeping your business operating effectively. Your bookkeeper or accountant will be able to guide you to ensure the process is as seamless as possible.
Looking for support with your BAS? We can help. Keeping Company can help you prepare and lodge your BAS, ensuring you pay the right amount over the right amount of time. Contact us today to find out more.
At Keeping Company, we’re not just accountants, we’re business people too. With our counsel, your business can reach its full potential.
For all media enquires please contact Tracy Miller, CMO, Keeping Company 0414 898 452.
The material and contents provided in this publication are informative in nature only. It is not intended to be advice and you should not act specifically on the basis of this information alone. If expert assistance is required, professional advice should be obtained.