BAS Time has just got a lot easier with the ATO's new "Simpler BAS" plus with BAS time again- tips & common errors to avoid!
Do you remember when our own team was part of the Australian Governments Board of Taxation Review into the Tax impediments for small business that was commissioned by the then Minister for Small Business, Bruce Billson? One of the key recommendations from the review was to reduce the BAS reporting requirements down to what the ATO actually need or use.
Well the wait is over!! It is happening, ok maybe 2.5 years after the recommendation was made, but it is here! The ATO is reducing the amount of information needed for the business activity statement (BAS) to simplify GST reporting.
When?
From 1 July 2017, Simpler BAS will be the default GST reporting method for small businesses with a GST turnover of less than $10 million.
What does this mean?
You will only need to report:
- Total sales
- GST on sales
- GST on purchases.
This will not change your reporting cycle, record keeping requirements, or how you report other taxes on their BAS.
The benefit?
The Simpler BAS will:
- make it easier for you to classify your transactions and lodge your BAS
- reduce the time you spend on form-filling and making changes that don't impact the final GST amount.
What's next?
- The ATO will automatically transition eligible small business' GST reporting methods to Simpler BAS from 1 July 2017.
- You can choose whether to change your GST bookkeeping software settings to reduce the number of GST tax classification codes. Please let us know if you require assistance.
- If you registered for GST after 19 January 2017, you can start using Simpler BAS reporting straight away!
It’s nearly BAS time again - tips & common errors
BAS time seems to come around quicker and quicker! Here are some tips to try and make it a little easier! We have also included a summary of common errors we see, take a look to ensure you don’t do these.
Get organised
- Make paying your BAS easier by setting GST collected aside in a separate account where it will accrue interest. If you find you can’t keep your hands off it during tight cash flow periods then you might prefer to work out your BAS from last year, divide it by 52 and have that amount on an auto direct deposit to the ATO.
- Don’t leave your BAS statement until the last day before the deadline. Get yourself organised and take baby steps along the way. Reconcile your bank accounts regularly. Do a little bit each day and the task will be a lot easier. Speak to us about cloud software that can assist with this process.
Double-check
- Check your bank reconciliation report, to make sure the bank balance in the report matches your bank statement.
- Check there are no outstanding transactions in the bank reconciliation report.
- Check your GST liability account (current balance sheet) matches your latest BAS statement.
- Compare your current BAS with previous BASs, particularly those from the same period last year and check anything that stands out as quite different.
Protect cash flow
- If required, pay your BAS via credit card to give you an extra 30-55 days of cash flow (and in some cases accrue reward points).
- Partner up with an accountant. I have seen huge amounts of undeclared sales build up massive GST liabilities that clients weren’t aware of until the end of the year causing severe problems for cash flow.
Protect your good name
- If you find yourself struggling to get your BAS in or pay your BAS payment the best option is to contact the ATO ASAP. Penalties, interest and instalment arrangements can be negotiable with the ATO as long as you have strong and reasonable ground for being late and can outline a suitable instalment plan.
Utilise exceptional service
- Use a service like receipt bank to organise your receipts and invoices online. Take a photo with your phone or email or scan your receipt to them and they electronically extract the data ready for you to send into your accounting program.
- Use an accountant to review the data you have completed. We will make sure the reconciliations are correct and lodge your BAS for you. Not only will you have peace of mind because you will know you won’t end up with a nasty surprise at the end of financial year, but you will also get an extra month to lodge your BAS. This means one month extra for you to complete your bookkeeping and one more extra before you have to make your BAS payment!
Common BAS errors
When you’re completing your activity statements, it’s easy to make mistakes. The main mistakes users make are in relation to tax codes. Users often use the wrong tax code when entering various transactions into their software. Here are some common transactions that are often coded incorrectly. We show the correct tax code application:
General expenses
- ASIC Filing Fees: These are GST Free
- Bank Fees: There are two main types of bank fees – general bank charges like monthly fee annual fees and merchant banking fees. General bank fees are GST Free and merchant bank fees include GST.
- Donations: Donations are GST Free.
- Insurance Policies: Most insurance policies include a stamp duty component. This is GST Free but the rest of the policy includes GST. Check your renewal notices as some also include extra fees and insurances which may or may not include GST.
- Interest Income: Use ITS (Input Taxed Sale) as the tax code here.
- Motor Vehicle
- Registration: In Victoria, the vehicle registration is broken up into 3 parts: Registration Fee, TAC Charge and Duty Insurance. Only the TAC Charge includes GST; the other 2 components are GST Free.
- Purchase of a Luxury Car: Each year the ATO provides the luxury car limit and the maximum amount of GST which can be claimed. You cannot claim the entire amount of GST on the purchase a luxury vehicle.
- Purchases of Food (for food industry businesses): Some foods are GST Free and others are subject to GST. For café’s and restaurants this can be complicated so it is best to check your suppliers invoice to be sure. We often recommend food industry clients to have two “Purchases” accounts, one for GST free and one for GST.
- Wages & Superannuation: Neither of these items attracts GST. Wages should be reported at W1 and tax withheld at W2 on the BAS; superannuation is not included on the BAS at all.
- Business & Private Usage: You should be determining the business usage percentage of items like motor vehicle, telephone, rent, power etc. This can be done by keeping log books or measuring floor space of your home office if you use one. Once you have a percentage to use, you should be applying this to each transaction for these items which will give you the correct of GST to claim e.g. if your business usage percentage is 50% and your telephone bill is $100.00 including GST, then you can only claim $50.00 business usage including $4.54 GST.
Other Items
- Sale of Business Assets: If you sell a company vehicle or equipment, you must include GST as part of the sale price. There are some exceptions, contact us if your not sure
- Health Services: Some health services are GST free and some are not.
There are many more items we could like here but these are the more common ones. Keep this list and refer back to it when you are unsure as to the correct tax code to use when completing your BAS.
Don’t forget, your BAS is due to be lodged and paid by 28th July 2017 (and your employee’s superannuation!)
For more information, guidance and/or advice on this subject, or for a complimentary consultation to review your affairs please contact SMART Business Solutions on 0359 11 7000 or reception@smartbusinesssolutions.com.au
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