If you’re considering going out on your own and starting a business, then it’s a good idea to familiarise yourself with business activity statements.

Commonly referred to as your BAS, your business activity statement helps you to stay on top of the taxes that are associated with running your business.

As a business owner, the areas of the BAS that you’ll most commonly use are:

• Goods and services tax (GST)
• Fuel tax credits
• Pay as you go (PAYG) instalments
• PAYG withholding tax

Since you’ll generally be lodging and paying your BAS quarterly, unless the ATO has told you otherwise, we’ve rounded up 5 tips of the trade to help you understand and nail these sections of your BAS.

Goods and services tax (GST)

GST is a broad-based tax of 10% on the sale of most goods, services, and other items sold or consumed in Australia. If you are registered for GST, generally you will need to include GST in the price you charge for your goods or services, and you can claim credits for GST included in the price of good and services you buy for your business.

Tip of the trade #1: check-in on your income

If your business sales (gross income minus GST) are $75,000 or more in a 12-month period, you’ll need to register for GST within 21 days. Make sure you’re checking in regularly to see if you’re approaching this threshold or if you’re close to exceeding it. This will go a long way to ensure that you don’t get caught out!

Tip of the trade #2: keep accurate records

Keeping accurate business records is a great habit to get into from the start, however it’s more important than ever once you’re registered for GST. Keeping accurate records will help you stay on top of how much GST you need to report and how many GST credits you can claim on your BAS.

Fuel tax credits

Fuel tax credits provide your business with a credit for the fuel tax that is included in the price of fuel. Once you’re registered for GST, if your business uses taxable fuel, you may be eligible to register and claim fuel tax credits on your BAS.

There’s a couple of things to keep in mind when it comes to fuel tax credits:

• You cannot claim fuel tax credits for light vehicles (with a gross vehicle mass of 4.5 tonnes or less) used to travel on public roads.
• Fuel tax credit rates change regularly, so make sure you’re using the fuel tax credits calculator on the ATO website each time you claim.
• You can check your eligibility and claim fuel tax credits at gov.au/ftccalc.

PAYG instalments

When you’re a business owner, tax isn’t automatically withheld from your income like it was when you worked for someone else, so you’ll need to plan ahead to avoid a large tax bill. This is where PAYG instalments can help. PAYG instalments are regular prepayments of the tax on your business and investment income.

The ATO uses information from your most recent tax return to determine if you should be automatically entered into PAYG instalments. As a sole trader, you’ll be automatically entered if you have all of the following:

• instalment income from your latest tax return of $4,000 or more
• tax payable on your latest notice of assessment of $1,000 or more
• estimated (notional) tax of $500 or more.

Tip of the trade #3: enter into PAYG instalments voluntarily

If you’ve just started your own business and think you’ll satisfy the entry thresholds above or you want to prepay your tax, it’s a good idea to voluntarily enter into PAYG instalments. This will help you smooth out your cash flow and avoid a large income tax bill when you lodge your tax return.

Tip of the trade #4: vary your PAYG instalments

If you’ve owned your business for a while, you may have a fair idea of what your expected tax will amount to at the end of the year. You can vary your PAYG instalments on your BAS if you think they will result in you paying too much, or too little, income tax throughout the year.

PAYG withholding tax

If you have employees, you’ll need to make sure that you’re registered for PAYG withholding. As we touched on above, employers have an obligation to collect income tax on behalf of their employees and send it to the ATO, so that their employees don’t get hit with a large tax bill when they lodge their tax return.

Lodging and paying your BAS

Generally, you’ll need to lodge your BAS quarterly, unless the ATO has told you otherwise:

Tip of the trade #5: lodge and pay your BAS online

You have several options for lodging your BAS. Most businesses that lodge their own BAS, prepare and lodge online. Lodging your BAS online is a quick, easy and secure. As an added bonus, by lodging your quarterly BAS online, you may receive an extra two weeks to lodge and pay!

You can also pay electronically which is more secure as your payment can’t get stolen or lost in the mail. The safest and easiest payment methods are BPAY and credit card through our online services.

You can lodge and pay your BAS online via:

• Online services for individuals and sole traders, at gov.au/createmygovaccount
• Online services for business, at gov.au/OSB
• Standard Business Reporting (SBR)-enabled software.

More information

So, there you have it, five tips of the trade to help you nail your BAS.

Remember, a registered tax or BAS agent can also offer you advice and help you lodge your BAS if you are ever feeling stuck. You can also find more information about all the topics we have discussed in this article on the ATO website.

For more information on:

• Goods and services tax (GST), visit gov.au/gst
• Fuel tax credits, visit gov.au/ftc_business
• Pay as you go (PAYG) instalments, visit gov.au/paygi
• Pay as you go (PAYG) withholding, visitgov.au/paygw
• How to lodge and pay your BAS visit, gov.au/lodgeBAS