Managing BAS and GST Reporting

Tackling GST and BAS reporting can be complex, but sidestepping compliance? That’s a tax-time tangle your small business should avoid.  

Why? To start off, the repercussions can be far more headache-inducing: hefty fines, interest charges, and potential audits—all of which can drain your resources and disrupt your operations. 

This article will provide valuable insights into managing GST and BAS reporting, highlight common pitfalls, and offer solutions to help small business owners navigate these tasks efficiently. 

Understanding GST and BAS 

GST is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. If your business has an annual GST turnover of $75,000 or more ($150,000 for not-for-profits), you must register for GST. Once registered, you are required to include GST in your prices, issue tax invoices to your customers, and lodge BAS to report your GST obligations to the Australian Taxation Office (ATO). 

BAS is a form submitted to the ATO that summarises the GST collected and paid, as well as other tax obligations such as PAYG (Pay As You Go) withholding and PAYG instalments. BAS is usually lodged quarterly, but businesses with a higher turnover may need to lodge monthly. 

Key Steps for Managing GST and BAS

1. Accurate Record-Keeping

• Keep records of all sales, fees, expenses, wages, and other business costs. 
• Ensure appropriate records, such as stocktake records and logbooks, to substantiate claims. 

• Reconcile sales with bank statements regularly. 

• Use the correct GST accounting method (cash or accrual). 
• Maintain all tax invoices and GST records for at least five years.
  
  

2. Claiming GST Credits

• Only claim GST credits on the business portion of purchases. 

• Use the discounted price when claiming GST credits for discounted purchases. 

• Claim GST credits on the Australian dollar value for invoices in a foreign currency. 

• If your business changes or ceases, you may need to repay some GST credits for retained business assets.
  
  

3. Proper Invoicing

• Ensure GST is included on invoices for sales. 

• Only claim GST credits if you have tax invoices for purchases of $82.50 (including GST) or more. 

• Avoid duplicate counting of invoices.
  
  

4. Avoiding Manual Errors

• Use the correct formulas to work out GST. 

• Maintain a separate column for GST in your cash book. 

• Ensure column totals and row totals in your cashbooks match. 

• Classify and enter transactions correctly into your accounts payable and receivable systems. 

• Utilise an electronic record-keeping system tailored to your business type.
  
  

5. Completing and Lodging BAS

• Enter whole dollar amounts; exclude cents and do not round up. 

• Report each invoice once only. 

• If accounting for GST on a cash basis, report expenses and sales within the period you made or received payment. 

• Double-check figures and calculations if completing BAS manually. 

• Correct mistakes on a subsequent BAS. 

Common BAS and GST Mishaps—and How to Resolve Them

1. Late Registration or Deregistration for GST

• Problem: Delayed GST registration can lead to penalties and fees, while premature deregistration can result in unnecessary costs. 

• Solution: Monitor your turnover closely and consult with an accountant to determine the optimal time for registration or deregistration.
  
  

2. Incorrectly Claiming GST Credits

• Problem: Claiming GST credits on private expenses or the incorrect portion of business and personal use items can result in compliance issues. 

• Solution: Clearly separate business and private expenses and only claim the business portion. Keep detailed records to substantiate claims. 
  
  

3. Failing to Report Discounts Correctly

• Problem: Claiming GST credits on the full price instead of the discounted price can lead to errors in BAS reporting. 

• Solution: Always use the discounted price when claiming GST credits, even if the discount does not appear on the invoice.
  
  

4. Inadequate Record-Keeping

• Problem: Poor record-keeping can lead to missed claims, incorrect BAS reporting, and potential penalties. 

• Solution: Implement a robust record-keeping system, preferably electronic, to ensure all transactions are accurately recorded and easily accessible.
  
  

5. Late BAS Lodgment and Payment

• Problem: Missing BAS lodgment and payment deadlines can result in fines and interest charges. 

• Solution: Set reminders for BAS deadlines, and if you’re unable to lodge or pay on time, contact the ATO to arrange an extension or payment plan. 

While GST and BAS reporting might initially seem like a challenging task for small businesses, the repercussions of neglecting these obligations can be far more troublesome. By staying compliant, you not only avoid unnecessary headaches but also set your business up for long-term success and stability. 
 
For assistance and to ensure you’re on the right track, consider engaging professional accounting services. Contact Retinue today at 1800 861 566 to learn how we can help you manage your GST and BAS responsibilities effectively.