When it comes to preparing and lodging Business Installment Activity Statements (BAS), you might be unaware of the mistakes you have already committed. It is important to pay heed to these statements and make sure you avoid these common mistakes.
1. Selecting the cash method
Do you understand the implications of a turnover? Perhaps, you need to be aware of these things because they play a critical role when it comes to registering for GST with the ATO. If your business has a turnover of less than $2 million, you need to select whether you are going to use the cash or accrual accounting method. More often than not small businesses opt for the cash method, but this may not always be a good choice. For cash-based businesses that have no debtors and creditors to pay, the accrual method is a great option to consider. This option allows you to claim the GST back on purchases immediately. You will not hurt your cash flow this way. Make sure you update your bookkeeping system with this method and correct reports must be printed.
2. Not declaring the wage amount when preparing a quarterly BAS
If you are withholding more than $25,000 per annum in PAYG Withholding from your employees, the ATO will decide to move you to a lodgement cycle which is on a monthly basis. The advice will be done in writing. Once advised, you will need to lodge monthly Instalment Activity Statements (IAS) and quarterly Business Activity Statements (BAS). You should also take note of the lodgement schedule for GST and PAYG. GST must be reported once a quarter while PAYG should be reported once a month.
3. Varying your PAYG Income Tax Instalment without the accountant’s advice
When calculating your tax amount, the ATO is usually working about one to two years behind the actual amount you should be paying. You have to understand that circumstances can really change over these years especially when businesses grow or shrink. These circumstances may lead to changing your income tax instalment amount. You need to check with your accountant or bookkeeper before you consider revising the amount paid. If you choose to vary your instalment downwards without the advice from your accountant, you may end up paying fines and penalties.
4. Failing to lodge by the deadline
Take note of the lodgement dates so you will no risk falling behind. For BAS, you need to lodge on the 28th day of the month following the quarter except for the December quarter where the due date is moved to 28 February. For businesses lodging via a Tax agent or BAS agent, you will be given an extra lodge in addition to your lodgement date. Avoid late lodgements as the ATO will fine you $180 for each month of delayed submission of BAS.