While the Business Activity Statement does not carry the romance and drama of an Ancient Greek tragedy, there are still many misconceptions of what the BAS is and what it means for your business.
Myth 1: GST is the only tax recorded in the BAS.
While GST is the biggest part of the BAS, it is not the only amount recorded. Other taxes to be aware of when completing the BAS include:
PAYG-Withholding (if registered)
PAYG-Instalments (prepayments of income tax liability, dependant on your business income in your previous tax return)
ABN-Withholding (payments withheld from suppliers who did not quote a valid ABN)
Fuel tax credits (if claimable)
Wine Equalisation Tax (WET) (if applicable)
Luxury Car Tax (LCT) (if applicable)
Myth 2: If I have an ABN, I must register for GST and lodge BAS's.
This myth is partly based on reality. Businesses which have a sales turnover of greater than $75,000 must register for GST and report BAS's at least annually. However, if your sales turnover is less than the threshold, then registering is optional.
A business starting out, with low initial income, does not necessarily have to register for BAS. However, that business also misses out on claiming the GST credits of any claimable expenses incurred.
Often it is still beneficial to voluntarily register for GST at this stage, as the business is likely to receive a refunded amount.
Myth 3: My business is making a loss, so automatically I will get a BAS refund.
Unlike the Income Tax Return, the BAS is not based on net profit. Rather, in its simplest form, it is based on the GST collected from income, after being reduced by the GST credits spent on work-related purchases.
Expenses from suppliers not registered for GST are not included in the calculation of the BAS period amount payable. Therefore, if your business has a large amount of these purchases (driving your business to a P&L loss), you may still end up with an amount payable for the period.
Myth 4: GST rate can vary i.e. 5%, 15%, or 10%.
In other jurisdictions (such as UK/EU) the equivalent of our GST can have variations in the rate charged/claimable.
However, in Australia we have the same GST rate, currently being 10%. If your invoices are showing a different GST rate, check your accounting/invoicing software to ensure the GST on income and GST on expenses rate is 10%.
This information is not to be relied upon without speaking to your accountant, tax agent or financial adviser depending on the advice