Lesson 4: Understanding STP, IAS and BAS

Some of the scariest things around tax time can be confusing terms or language. Everything might seem a little overwhelming or complicated and as a result, you might think it's easier to avoid doing anything that looks difficult.

BREAKING NEWS: It's really simple! It's just been made to look really complex from years of acronyms, legislation and contradictory descriptions. 

In this lesson, we'll break down some of those concepts and simplify them so you can feel confident enough to go into tax time with gusto and expertise. 

Let's start with STP. Which stands for Single Touch Payroll.

Single Touch Payroll (STP) is the new, compulsory way to report payroll information for your business to the Australian Taxation Office (ATO). It was introduced in 2019 and uses internet cloud accounting software to submit information online.

This means:

  • businesses don’t need to complete payment summaries
  • group certificates at the end of financial year
  • STP software automatically sends your employees’ tax and superannuation info to the ATO

See what we meant by making things simple?

Not only does STP help you, it also helps the people who work for you.  All their details – salary, PAYG withholding and super — is readily available via their myGov account so they no longer have to wait until EOFY to see their tax information. It's another weight off your shoulders.

Employers can automate and streamline their processes and keep their accounting data accurate and up-to-date. Having better and timely information at their disposal enables them to make more-informed business decisions as well as sharing essential payroll information with the ATO more easily.

What about activity statements? Are they important and complicated?

The answer is yes they're important and no they're not complicated.

Any stress you feel at EOFY about activity statements can be reduced with knowledge. When you understand what activity statements involve, what they're for and when they're due, everything else becomes a little easier and positive for your business.

Simply put, activity statements get issued by the ATO so that businesses can report and pay tax in one form.

There are two types of activity statements – an instalment activity statement (IAS) and a business activity statement (BAS). Let's see what they're all about!

IAS - Instalment Activity Statements

Issued quarterly, an IAS tells the ATO what your GST instalment amount is, and, where applicable, what your PAYG instalment amount is.

There is no need to print any reports or make any calculations. However, there are benefits if you can accurately calculate what you're legally responsible for. Which you should be doing anyway, right? Of course you are.

Any adjustments for Goods and Services Tax will be calculated when your annual GST return is lodged and any adjustments on PAYG will result in an amount that is payable or refundable when your income tax return is lodged.

If you choose to pay the amount shown on the form, you do not need to physically lodge anything with the ATO. However, if you wish to vary the amount shown, you will need to lodge the form by the due date.

The instalment amounts for an IAS are payable as follows:

YEARLY QUARTER

DUE DATE

July - September 28 October
October - December 28 February
January - March 28 April
April - June 28 July

BAS - Business Activity Statements

BAS are a little more complicated. They are issued by the ATO either monthly or quarterly. A form needs to be lodged with the ATO and payment made to the ATO by the due dates as follows.

  • For monthly BAS: within 21 days of the end of the month on the form
  • For quarterly BAS: as above for IAS

Business Activity Statements can include some or all of the following payments. Remember only those marked by an asterisk (*) are included on the IAS.

  • Goods and services tax (GST)*
  • Pay as you go (PAYG) income tax instalment*
  • Pay as you go (PAYG) tax withheld
  • Fringe benefits tax (FBT) instalment
  • Luxury car tax (LCT)
  • Wine equalisation tax (WET)
  • Fuel tax credits

 

At the end of the day, these activity statements are just another way to keep a close eye on your finances. The less chance of your cashflow getting out of your control, the better. 

The best way to keep that from happening is to feed your business mind with essential knowledge early. We hope that this lesson has left you not feeling hungry. 

If you're trying to make sense of any other tax and accounting terminology our jargon buster guide will help break it down for you.

book-open

In the next lesson

We'll talk about taking stock. Cataloging your inventory, the costs involved and how this can affect your profit and loss. See you there!