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BAS statements explained for a closed business

If the ATO issues a document like a business activity statement (BAS) then they expect it to be lodged on time and any payment made in full.

You cannot just ignore BAS statements because your business:

It is up to you to cancel any tax registrations like GST and PAYG withholding registrations.

Your tax agent can handle this for you.

How to stop getting BAS statements

A business will only receive activity statements if it is registered to pay certain types of tax such as GST or PAYG withholding (tax deducted from payments like employee wages).

Until you cancel these registrations, you will keep getting activity statements on a monthly or quarterly basis. This means it is very important to update your registration details with the ATO. It is critical to make these cancellations effective from the right date.

Allow us to illustrate this with a real-life case study

Bec worked as a contractor on a GST registered basis during the 2007-08 financial year. Her employer insisted she register for GST and Bec lodged activity statements and paid GST.

Once she stopped working for the employer, Bec stopped lodging activity statements. She moved house and forgot all about the GST registration.

It wasn’t until years later that she received correspondence from the ATO about debt on her “integrated client account”. The integrated client account is the BAS account. The ATO track BAS debts and income tax debts separately.

The ATO had fined Bec over $5,000 in failure to lodge penalties in relation to 5 years’ worth of activity statements. Because Bec never cancelled her GST registration, the ATO assumed she still had an active business and kept sending activity statements.

There were over 20 overdue statements and many of these had caused a failure to lodge penalty to be issued.

Bec contacted Beyond Accountancy for help. We cancelled her GST registration immediately but instead of cancelling from the present date, we backdated the cancellation to 1 July 2008. This meant that all the activity statements from the September 2008 quarter onwards were discontinued and Bec had no obligation to lodge anymore.

Beyond Accountancy negotiated with the ATO on the fines and explained that the registration should have been cancelled many years ago. We argued that it was not appropriate to fine a taxpayer for the late lodgment of BAS statements that didn’t even need to be lodged, in the end.

Luckily for Bec, the ATO agreed and remitted the entire amount of the fines.

What you can learn from Bec

  1. Make sure you cancel any tax registrations once a business has ceased; and
  2. Don’t ignore ATO documents. If you have no activity for a particular quarter, you still need to do a nil lodgment (unless the business has ceased- see point 1)

For professional assistance with your tax affairs, please contact us. We can help clients anywhere in Australia through our online consultations or you can make an appointment at our Melbourne office.

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