Understanding IAS and BAS/GST Returns for Small to Medium-Sized Businesses
Running a small or medium-sized business (SMB) comes with its share of responsibilities, especially when it comes to managing taxes and ensuring compliance with regulatory requirements. Two key tax lodgements that business owners must be familiar with are the IAS (Instalment Activity Statement) and the BAS (Business Activity Statement), which includes the GST Return. Both play a crucial role in ensuring your business is meeting its tax obligations. In this blog, we’ll dive into the details of these returns and help you understand what they are, who needs to prepare them, and how to stay on top of deadlines.
What is an IAS Return?
The IAS (Instalment Activity Statement) is a tax return businesses use to report and pay certain taxes to the Australian Taxation Office (ATO). The IAS is used explicitly for two primary purposes:
- PAYG (Pay As You Go) Income Tax Instalment: This is for businesses that are required to pay income tax in instalments throughout the year. Instead of paying your tax bill in one lump sum at the end of the financial year, you make periodic payments based on your income tax liability estimate.
- PAYG Withholding (Reportable Monthly): If your business has employees, you may need to report the amount of tax you’ve withheld from their wages each month. This is part of your obligation to remit taxes to the ATO on your employees’ behalf.
In summary, The IAS return helps businesses manage income tax and payroll-related tax obligations by reporting PAYG instalments and PAYG withholding amounts.
Who Needs to Prepare the IAS Return?
Generally, businesses that are required to make PAYG income tax instalments or PAYG withholding payments need to lodge an IAS.
- PAYG Income Tax Instalment: If your business has been in operation for a while and has income above a certain threshold, you may be required to make regular payments toward your tax liability. If you’re new to business, the ATO may automatically enrol you, or you may need to request to be enrolled.
- PAYG Withholding: If you employ staff and withhold tax from their wages, you need to report this through the IAS.
Even if your business does not meet the threshold for income tax instalments, you may still need to lodge the IAS if you are withholding taxes from employee wages.
How Often Does the IAS Return Need to be Prepared & Lodged?
The frequency of IAS lodgement depends on the specific obligations your business has with the ATO:
- PAYG Income Tax Instalments: Typically, businesses that are required to pay income tax instalments lodge their IAS quarterly, but some may be required to lodge monthly or annually, depending on their individual circumstances.
- PAYG Withholding: If you withhold tax from employees’ wages, you may need to lodge the IAS monthly or quarterly, depending on the size of your business and the amount withheld.
What Are the Due Dates for IAS Lodgement?
The due dates for lodging your IAS depend on your reporting frequency:
- Quarterly IAS: For businesses on a quarterly reporting cycle, IAS returns are generally due 28 days after the end of each quarter.
- For the quarter ending 30 September, your IAS is due by 28 October.
- For the quarter ending 31 December, it’s due by 28 February.
- For the quarter ending 31 March, it’s due by 28 April.
- For the quarter ending 30 June, it’s due by 28 July.
- Monthly IAS: If you’re required to lodge monthly, your IAS return is generally due on the 21st day of the following month. For example, if you’re lodging for June, the due date would be 21 July.
What is a BAS/GST Return?
The BAS (Business Activity Statement) is another key return that businesses need to lodge. This return is specifically for reporting and paying Goods and Services Tax (GST), along with other taxes such as PAYG withholding, PAYG instalments, and Fringe Benefits Tax (FBT).
The GST Return is part of your BAS and is required if your business is registered for GST. It details the GST you’ve collected on sales and the GST you’ve paid on business-related purchases. The difference between these amounts determines whether you owe money to the ATO or are entitled to a refund.
Who Needs to Register for GST?
In Australia, businesses are required to register for GST if their annual turnover exceeds $75,000. However, even if your turnover is below this threshold, you may choose to voluntarily register for GST.
There are several reasons why businesses may opt for GST registration, even if they’re not required by turnover:
- No Guessing About Earnings: If your business is registered for GST, clients and customers can’t easily guess how much you’re earning because your business appears as GST-registered in official records.
- Input Tax Credits: By being registered, you can claim back the GST you pay on your business expenses (known as input tax credits). This can result in savings on the cost of running your business.
How to Prepare Your BAS/GST Return
Preparing your BAS/GST return involves:
- Calculating GST Collected: This is the GST you’ve charged on your sales. For example, if you sell a product for $110 (which includes $10 GST), you report the $10 GST as part of your collected GST.
- Calculating GST Paid: This is the GST you’ve paid on your business purchases. For example, if you buy office supplies for $110 (which includes $10 GST), you can claim back the $10 GST as part of your paid GST.
- Calculating Other Taxes: Depending on your business, your BAS might also require you to report PAYG withholding amounts, PAYG instalments, and Fringe Benefits Tax (FBT).
- Net Amount: The GST on your sales minus the GST on your purchases determines whether you owe money to the ATO or will receive a refund.
What Needs to be Reported in a BAS/GST Return?
The key items you need to report in your BAS/GST return include:
- GST on Sales: Total GST charged on sales to customers.
- GST on Purchases: GST paid on purchases or business expenses.
- PAYG Withholding: The amount you’ve withheld from your employees’ wages.
- PAYG Instalments: The amount you’ve set aside for income tax payments.
- Other Taxes: Depending on your business type, there could be other taxes like FBT that need to be reported.
What Are the Due Dates for BAS/GST Lodgement?
The due dates for lodging your BAS/GST return depend on your reporting cycle:
- Quarterly BAS/GST: For businesses that report quarterly, the due dates are:
- For the quarter ending 30 September, it’s due by 28 October.
- For the quarter ending 31 December, it’s due by 28 February.
- For the quarter ending 31 March, it’s due by 28 April.
- For the quarter ending 30 June, it’s due by 28 July.
- Monthly BAS/GST: For businesses that report monthly, the due date is typically the 21st day of the following month.
Understanding your IAS and BAS/GST returns is crucial for running a compliant and efficient business. While the details of tax lodgement may seem overwhelming, staying on top of your obligations helps you avoid penalties and manage your cash flow effectively. Whether you’re reporting PAYG income tax instalments, withholding tax, or your GST obligations, regular, accurate filing is key to keeping your business on track. If you’re unsure about your specific requirements, it’s always a good idea to consult with a tax professional or accountant who can guide you through the process.
