The Questions You Need Answered About Managing BAS and GST
This article first appeared on the MYOB Blog titled ‘Managing BAS and GST‘.
BAS stands for Business Activity statement.
All Australian businesses that have revenue of over $75,000 (except for not-for-profit organisations which can be over $150,000) are legally required to fill in a Business Activity Statement and report to the Australian Taxation Office.
How often do I need to do a BAS?
Usually businesses just starting up would report once a quarter – by the 28th October, 28th February, 28th April and 28th July. If you report quarterly, you have 3 options:
Option 1: work out, report and pay GST quarterly
Option 2: work out, report and pay GST quarterly and provide further information annually in an annual GST information report
Option 3: pay a set GST instalment amount quarterly and report annually in an annual GST return.
Once your business has a turnover of $20 million, then you have to report monthly – by the 21st of each month.
Some very small businesses may choose to be registered for GST, even though they are not required to be registered. They are allowed to report their BAS once a year.
However, do check the BAS form sent out to you, as it does show the due date and frequency of return – the frequency is determined the information provided when you registered or updated your information for GST.
What if I am running late for my BAS?
If you have a good reason for being late with your BAS, you can ring the ATO and request an extension. But this should be done before the due date and not too often.
You can ask your MYOB Certified Consultant or BAS agent to register you to have electronic returns via a ATO portal – this gives you up to 4 weeks longer to get your return in. Or have your accountant submit it for you, as they get a time extension too.
Try to get your BAS form in by the due date, even if you are struggling to pay, as the ATO will fine you for being late with your form as well as charge interest on overdue payments.
If you are struggling to pay your BAS, you can make a payment arrangement with the ATO, but it’s a good idea to have a chat to your accountant if you are in this position.
What do I report on my BAS?
The BAS is made up of summaries of your business reportable earnings and spendings. In simple terms, we report all business earnings and spendings with GST tax status, GST free tax status, overseas incomes and spendings.
We report our total wages and total PAYG withheld from wages. PAYG instalment is where the ATO is looking for an estimate of the company tax that the business is likely to earn for the year, and requiring a “prepayment” of the tax that would normally be due at year end. You are paying an instalment of the company tax. So in this area, you may need to report the business earnings for the period and apply a set dollar or set % tax to the earnings. This amount then gets included with your total GST return.
Sometimes we also need to report Fringe Benefits Tax – when we use business income for personal benefit (for example, using the company car for personal use). This is a good conversation to have with your accountant!
What is the difference between the tax codes in MYOB?
There are 5 main codes that I usually use in MYOB. All except for N-T get reported on the BAS.
CAP is the code for purchases of Assets – depending on what the government and accountant’s dollar threshold is currently.
GST is the code for most transactions that have to be reported to the ATO. Generally, if it is a transaction that appears on your profit and loss statement AND there is a tax invoice, it will be reported with GST on it.
FRE (GST FREE) – these are the transactions that are exceptions – they appear on your profit and loss AND there is a tax invoice, but the tax invoice will show no GST
OS (OVERSEAS) – this code is used on overseas sales with zero GST
N-T is used where the transaction is a tax, or a movement of money between accounts or where there is no tax invoice
Wow, that’s a bit hard. What does this all mean?
OK, I will give you some examples to help you with this.
Say you buy a new printer that is costing $11,000. You have a tax invoice showing GST amount of $1,000. Because it is something of value that the business will use for more than one year, it would be an asset and have the tax code CAP.
Another one: you get an invoice for some milk for the business. It is a tax invoice, but the amount of GST on it is zero. This would be coded FRE – one of the rules about GST transactions is that all unprocessed food is GST free (I wonder if the hens agree that they haven’t processed it?) Another rule to know is that medical supplies and services are FRE, as are educational services.
What about this? You get an invoice for your car registration, but GST is not 1/11th of the amount owing. This is because there is stamp duty on the transaction – duty, levy, rates…all just different words for taxes. You would split the transaction into 2 lines, and put GST on one line and N-T on the one with the stamp duty.
I always think Worker Compensation is a tricky one, as Super and Wages are N-T (no tax invoice) but workers compensation does have a tax invoice with GST on it.
Bank charges are also tricky – mostly they are Input taxed (for ease, it’s OK to treat this as FRE) BUT merchant charges (for processing credit card payments) do have GST.
And if you pay off a loan or a credit card? N-T as it is just a transfer of money. There is no tax invoice for this payment, just a statement.
If in doubt about any GST treatment, talk to your MYOB Certified Consultant or BAS agent.
What is the difference between Cash and Accrual BAS Reporting?
Well spotted, if you have noticed this on your BAS form.
Generally, small businesses start off with CASH BAS. This means that they include reportable income that has been PAID to them and reportable expenses that they have PAID during the BAS reporting period.
Once a business has a turnover of more than $2 million a year, then it has to move to Accrual BAS reporting, which means that they include reportable income that has been recorded during the period, whether it has been paid or not, and same with reportable spendings.
So how can MYOB make my BAS easier?
There are lots of reports in MYOB AccountRight that help you with your reporting. You should look at the GST/Sales Tax heading and then at the summary and detail reports for GST (cash or accrual depending on your method of reporting).
Also use your Profit and Loss report to see your earnings for the period if you have to report PAYG Instalment. And also use the Payroll Summary report to see the gross wages and PAYG deducted from your employees for the period.
But better still, use the BASLink tool within MYOB. When it is set up correctly (and yes, get your MYOB Certified Consultant/BAS Agent to get it right), then you simply run it and you will see a form that looks exactly like the one that you are filling out for BAS with all the figures populated. The form shouldn’t need to be changed unless the ATO makes a change such as with the PAYG Instalment % or if you add new payroll categories or new tax types. Just copy the figures to your BAS form.
And if you have any further questions on this, get in contact with your MYOB Certified Consultant who can help you through the process and take the stress out for you.
The information provided here is of a general nature for Australians and should not be your only source of information. Please consult an experienced and registered tax agent as each small business’s circumstance will vary.