As everyone’s favourite time of year (tax time) rolls around again, sole traders and accountants will be turning their minds to preparing their BAS and GST reporting.
The number one rule for preparing your BAS statements is to use your accounting software, as this has all the smarts you need to complete your Business Activity Statement (BAS). It contains GST codes that you can allocate to each of your business transactions, and the accounting software will generate a report detailing GST-related income, expenses and capital purchase information for you, which you can use to complete the sections in the BAS. Your accounting software would basically do the work for you.
The key is ensuring the data entered into the software is correct. If you follow these golden rules, then you can be sure that you will have an accurate BAS to be lodged with the tax office.
Generally, you must hold a valid tax invoice to claim back any GST you are entitled to on purchases you make. The tax invoice must also state the GST amount included in the price. Refer to these tax invoices when entering business transactions into your accounting software so you can attach the correct GST code to each entry. Some transactions may be GST free. Do not guess the GST status. It is important to be accurate.
Reconcile your bank records with your accounting records for the period to ensure you have captured all income and expense transactions. This is the same with a credit card or petty cash you may use to pay for expenses in your business.
These purchases need to be recorded in a separate section of the BAS. The GST code you use when processing these transactions in your accounting software is different. For example, it can be CAP. By using this specific GST code, the GST report generated to complete your business BAS will separate these transactions and provide you with a total dollar amount to use. Whether an item is a capital purchase is not dependent on its purchase price. Examples of capital purchases include motor vehicles, computers, furniture, calculators, telephones and fax machines. Non-capital acquisitions include trading stocks, lease payments, and running expenses such as stationery, repair and maintenance.
The tax office will charge you a failure to lodge penalty (ranging from $110 to $550) if you do not prepare and lodge your BAS on time. Generally, your BAS will be due after each quarter of the financial year. The July to September quarter will be due in October, October to December — due February, January to March — due April, April to June — due July. Note: If you use a tax agent, you can obtain an extension of time to lodge your BAS and pay your GST each quarter.
It is vital to complete the basic steps in your BAS statement as mistakes induce penalties. Small businesses can have a worry free EOFY by visiting MYOB’s Tax Changes and Tips section, meant to help SME’s and startups stay organised during EOFY. It is important to meet all your tax and compliance obligations for all businesses.
The information provided here is of a general nature for Australia and should not be your only source of information. Please consult an experienced tax agent as each small business’ circumstance will vary for end of financial year.