Every business owner operating in Australia understands that preparing and lodging a Business Activity Statement (BAS) is a fundamental responsibility. This is true regardless of your business’s size, industry, and location, be it in bustling Perth or a quiet town in the outback.
However, some may wonder why it’s so essential. If you’re a Perth-based business owner grappling with BAS complexities and the broader scope of financial reports, this blog is for you.
Let’s delve deeper into five key reasons why preparing and lodging a BAS is crucial. We’ll explore how BAS covers various tax obligations, including Fringe Benefits Tax (FBT) instalments, PAYG income tax instalments, Wine Equalisation Tax (WET), and Luxury Car Tax (LCT). We’ll also discuss how BAS can be a vital tool for enhancing financial record-keeping and why it is essential for small business accountants and business advisory services in Perth.
1. Fulfilling Your Legal Tax Obligations
BAS is a critical component of the Australian tax framework. It allows the Australian Taxation Office (ATO) to calculate your business’s tax obligations accurately. The BAS allows the ATO to account for various taxes beyond just the Goods and Services Tax (GST).
Among these is the Fringe Benefits Tax (FBT), a tax employers pay on certain benefits they provide to their employees. If your business provides such benefits, you must lodge FBT instalments, and the BAS is the means to do it.
Another tax handled through the BAS is the Pay As You Go (PAYG) income tax. As a business, you must withhold a certain amount from payments you make to employees and other businesses, which are reported and paid through your BAS.
Further, the BAS is also used to manage the Luxury Car Tax (LCT) and Wine Equalisation Tax (WET). LCT applies when you sell or import luxury cars, while WET is a tax on wine consumed within Australia.
In addition to paying your BAS debts a BAS also reports to the ATO what your business is doing. This can be through disclosure of your business turnover, or the total salaries paid to your team.
These are just a few examples. Given the broad range of tax obligations managed through the BAS, it’s no wonder your small business accountants will emphasise its importance.
2. Demonstrating Financial Responsibility to Banks
Financial institutions and lenders see your tax compliance as an indicator of your business’s financial health. Banks will want to verify that you’re responsibly managing your tax payments and other financial obligations. Timely and accurate BAS lodgement can provide this assurance.
Moreover, banks often require BAS lodgements as part of the documentation necessary for business loans. They view it as proof of income and a demonstration of your financial accountability, potentially resulting in more favourable credit terms for your business.
If you need to catch up on your BAS lodgements, you are most likely not paying your debts as and when they fall due. So technically, you are not solvent. Getting your BAS lodged and paid on time every time is a crucial factor a bank will consider when choosing to lend to you or the pricing they will apply to your debts.
3. Accessing Your BAS Refund
A significant benefit of lodging your BAS is that it enables you to receive refunds for any overpaid GST. If you’ve paid more GST than you’ve collected, you’re entitled to a refund from the ATO. However, the only way to get this refund is by lodging a BAS.
When you work with a proficient ‘BAS accountant’, they can help you accurately calculate your GST and other tax liabilities, ensuring you claim all eligible refunds. It’s one of the essential BAS services that can significantly impact your business’s cash flow.
4. Better Cashflow Management
Managing cash flow is crucial in business, and lodging your BAS on time plays a vital role in this. If you fail to lodge your BAS on time, you may end up with hefty lump-sum payments, disrupting your cash flow.
When you lodge your BAS on time, your tax obligations are likely spread across the year in predictable instalments. This practice makes budgeting easier, reducing the likelihood of unpleasant financial surprises.
Good cash flow management is a key topic frequently in Perth’s business advisory services. Business advisors and accountants agree that timely BAS lodgement is an efficient strategy to maintain healthy cash flow.
If you then factor in the unusually high-interest rate charged by the ATO on late BAS payments and penalties charged by the ATO in lodging BAS late – you can see the detrimental impact of not getting your BAS lodged on time will have.
5. Ensuring Better Record-Keeping and Information Management
Preparing your BAS requires keeping detailed records of your income, expenses, and GST collected and paid. This requirement encourages better record-keeping practices, leading to improved financial reports, pivotal for strategic business decisions.
A significant aspect of BAS preparation is the reconciliation of the BAS to your balance sheet. This reconciliation is vital to ensure that your records are accurate and consistent. Any discrepancies can highlight potential issues that must be addressed, allowing you to maintain a precise and reliable record of your business’s financial activities.
So regularly preparing and reconciling your BAS is a key part of creating good reports you can use in your business to understand what is happening. With the help of your Perth business accountant, these quality reports can help you increase profits, reduce waste and better use the monies within your balance sheet.
Regular reconciliation also provides a clear picture of your business’s performance over time, making it easier for your accountant or business advisory service in Perth to offer strategic insights.
What is a Business Activity Statement?
A BAS is a tax report lodged with the ATO either yearly, quarterly or monthly. It is created and lodged by businesses and reports on the trading activities of the business and notifies the ATO of a range of business taxes due (or refundable) by the business.
What can we include in a BAS?
A BAS is a prescriptive form. So you can only enter the information as dictated by the ATO. You, as the business owner, are required to keep supporting records to support your positions you take in the BAS.
How do you prepare a BAS?
Every business, from BHP to the local corner store, prepares a BAS. And the complexity of the BAS lodged across business can vary significantly.
To understand how to prepare a BAS, you can engage with your local Perth Small Business Accountant or approach a BAS Bookkeeping business to understand what to do. Alternatively, TAFE colleges around Perth have good courses, and the ATO website is helpful as well.
The advancement of cloud accountant services has simplified the BAS preparation process significantly.
How do I register for BAS?
Your perth tax accountant can register you for your BAS tax registration happens smoothly. You can also call the ATO directly or engage with the ATO through Online Services.
How can a Business Accountant help you with BAS?
The BAS preparation can be smooth and painless when appropriately executed on time, every time. And getting a business accountant to help in the BAS preparation can ensure that your books are up to date and the tax risk of getting the BAS wrong is removed.
Conclusion
Preparing and lodging a BAS is not just about complying with tax obligations; it’s critical to managing your business’s financial health and driving its success. Professional small business accountants in Perth can offer invaluable support in this complex task, from BAS services to advice on financial reports and business advisory.
If you’re seeking expert advice and help to manage your BAS and other financial responsibilities, connect with an experienced small business accountant or BAS accountant today. Timely and appropriate advice can significantly influence your business’s growth and profitability, making all the difference to your success story.
