Jarrod Rogers CPA, 3 July 2020 No... you definitely can't. ...claim your coffee machine, that…
As the deadline approaches for the latest quarterly business activity statement (BAS), there will be many business owners starting to stress.
The quarterly chore of lodging a BAS holds as much anticipation as an appointment with the dentist.
Where are those receipts I was keeping? Can I claim GST on that?
How much am I going to owe and when’s the due date?
Am I using cash or accruals?
But it doesn’t have to be that way. If you’re suffering from “BAS stress” here are four simple remedies to try.
Cure #1: Let your bank do the hard work & run your business exclusively through your bank account
A lot of the stress of doing a BAS is trying to gather your transaction details from several different sources.
Let’s say you’ve paid some cheques from the business bank account, but then you’ve also paid some things in cash and used your personal EFTPOS card or credit card. Business owners who spend their money in this way up with transactions all over the place.
The only way to get everything together is to try to find every little receipt and docket from the past three months and try to combine them into a spreadsheet… Good luck.
Why not keep it simple? Run as many of your business transactions as possible through a business bank account. This will turn your bank statements into a business summary for the last quarter.
You don’t have to worry about remembering when you spent money, and which account it came from. It’s all there, neatly printed for you.
Cure #2: Lodge one BAS each year
One of the best-kept secrets in tax is that small businesses only need to lodge one BAS per year. A small business is one that has a turnover of less than $2 million. This cuts your compliance work by 75%.
The ATO calls this “GST Option 3”.
You can choose option 3 on the first quarterly BAS of a new financial year which covers the July to September quarter.
A key advantage of this option is that you lodge your annual return at the same time as you do your tax. Your accountant will need to match your activity statements with your tax return anyway, so makes sense to look at GST and tax at the same time, not as two separate jobs.
When I tell people this they usually have two objections.
They think they’ll have a cash flow problem: “But I’ll have a huge GST bill once a year – I can’t handle that”.
But that won’t happen. On the annual system, you still make a payment every quarter, so you keep up to date with your tax liability. The payment is based on your previous activity statements.
The second concern is that they will do their books once a year and it will be impossible, but lodging one BAS per year doesn’t mean doing your books once a year. A serious small business will want to know its financial position – profit and loss, cash flow, debtors and creditors – on a monthly basis. But it doesn’t need the hassle and technicality of calculating GST every quarter.
You wouldn’t choose to lodge four tax returns each year, so why lodge four activity statements?
Cure #3: Know how much GST you owe & keep it separate from other business funds
For some people the stress of lodging a BAS isn’t the paperwork – it’s finding the money to pay it.
However you do your bookkeeping, you need to be able to quickly identify how much GST you owe, and keep it separate from other business funds. For example, if you earn $11,000 that doesn’t mean you get to spend $11,000. The first $1,000 is GST which needs to be set aside and around 25% of what’s left is income tax for a typical taxpayer.
Every business owner needs to:
- Identify how much they need to set aside for GST and tax; and
- Keep that money separate from other business funds
The simplest setup is to have a business transaction account for all your income and expenses, and an at-call savings account to hold onto your tax and GST. It’s a simple way to know what money is yours and what isn’t and while the money sits there, it earns you some interest.
If you are running a business and you cannot quickly work out what your approximate tax and GST position is, then maybe it’s time for a better system. There are simple bookkeeping solutions that are low maintenance, online and affordably priced that can keep
you up to date.
Cure #4: Buy some time by using a tax agent
Quarterly activity statements are due four weeks after the end of the quarter. So for the July to September quarter, the due date is 28 October and for the March quarter, the date is 28 April etc. (There is an exception for the December quarter which is due on 28 February to allow for the fact many businesses close for much of January).
If you miss the deadline, you can be fined $110 for every month you’re overdue.
However, if you use a registered tax agent to lodge your BAS you have eight weeks, not four. This is one of the many advantages of getting professional help with your BAS.
If you receive a fine, incur interest penalties or have trouble paying off your GST debt your agent can talk to the tax office on your behalf. We have priority channels for dealing with the ATO such as the tax agent portal and priority call centres.
Make this your last quarter of BAS stress
If lodging your BAS and paying GST is an ongoing headache, it is time to do something about it. Call Beyond Accountancy on 1300 883 122 or book an appointment online. To arrange a call back click on the contact us link at the top of this page.
Not only can we sort out your current and overdue activity statements but we can set you up on a customised system to make your future bookkeeping a breeze. Our services to small and medium businesses include in-house bookkeeping services with payroll if required.
Once you eliminate the headache of tax and GST, you can focus more of your time on serving your customers, and growing and improving your business.