Understanding the Australian tax code can be difficult for those who are not familiar with common tax-related tasks. However, every business owner needs to have basic knowledge about the basics of accounting and taxation systems. If you are unsure of where to start, this blog will help you understand things related to BAS preparation.
What is BAS?
Any business that is GST-registered will need to file a business activity statement, or BAS. This form will help businesses pay their GST, PAYG withholding tax, PAYG instalments, and other taxes. When a company registers for their GST and ABN, they will automatically get a BAS when it’s time to lodge.
How does BAS Work?
Business Activity Statement is a form that reports the amount you are required to pay the ATO. The formula for calculating tax owed includes GST collected on sales, minus GST paid on purchases, plus pay-as-you-go withholding for employee wages, and pay-as-you-go instalment income tax. It is important to have numbers ready when it is time to lodge BAS for business. This is the reason why the ATO suggests maintaining a full record of all sales, expenses, wages, fees, and other costs related to your business. Many BAS-registered bookkeepers in Melbourne can help you in preparing BAS for your company.
In your BAS, you must know the sales for a specific period, the GST you paid on expenses, the GST collected, wages paid to employees, and the tax withheld from wages. Please keep in mind that you are only eligible to claim the GST on purchases made for business purposes. It is important to note that GST credits cannot be claimed for personal expenses such as food or entertainment. In the situation where a purchase is intended for both personal and business use, only the business portion of the item can be claimed. Moreover, getting bookkeeping services would be the first thing small and large businesses need to consider when trying to expand their businesses.
Consider Checking the BAS Preparation Checklist
It is important to be ready with accurate and relevant figures in your BAS. The following is the list of things you must check for the current period, concerning GST obligations.
Review the Statement Time Period
Make sure to check your records to check any of the actions that occurred (mentioned below) during the statement period. If present, they may have an impact on your activity statement:
• Purchase of property or equipment
• Fuel tax credits (if applicable)
• Overseas purchases
• Payroll terminations
• Loans for owners/directors
• Government grants
• Insurance claims and refunds
• Customs invoices
• Hire financial agreements and/or purchase agreements
Review Data
Ensure all information has been entered correctly and reconciled properly:
• Bank reconciliation
• Credit card transactions are reconciled
• Loans are reconciled properly
• All purchases and expenses are entered
• Cash drawer, petty cash and POS clearing accounts are reconciled
• Outstanding creditors and debtors are correct
• Subsidiary accounts are reconciled
• Clearing, undeposited funds and suspense accounts have a $0 balance
• PAYG withholding, deduction liability, superannuation, and ATO accounts are reconciled
• Data file auditing is done for bookkeeping software
• Different reports are compared
• Private usage journals are assessed and entered as needed
Reconcile GST
It is important to reconcile GST for your suitable accounting method. You can also look for an accountant for your company near your area by searching for an accountant near me.
• GST reconciliation with profit and loss statement (suitable for cash)
• GST reconciliation with balance sheet accounts (suitable for accrual)
Prepare BAS
By compiling and reconciling all reports, put your BAS together.
• Create a GST audit report
• Save GST reports for accrual and/or cash
• Create a summary report for GST
• Check that any deferred GST liability has been included (applicable for eligible importers)
• Fill in fringe benefits tax, fuel tax and/or wine equalisation tax (if applicable)
• Reconcile all accounts
• Add a lock date to the reporting time in your bookkeeping software
• Create a summary of payroll for the reporting period
• Prepare BAS
• Print BAS transaction report (if applicable)
• Complete BAS
• Back up all important files in an accurately labelled, secure location
Conclusion
If your business is registered for GST, then you need to prepare and lodge BAS for your business. If you don’t know how to prepare BAS, you can also have a call with a Reliable Bookkeeping Services provider.
Also Read:
Difference between Bookkeeper, BAS Agent and Accountant