Importance of Lodging BAS on Time and Challenges faced by Bookkeepers to Meet the Deadline
Are you lodging BAS on time? If you’re registered in GST then you have to keep BAS and its very important lodging on time to government. But sometime when you lodging BAS, bookkeepers have to face some troubles. lets talk about importance of lodging BAS on time and challenges faced by bookkeepers.
Importance of BAS
When a business is registered for GST, the business needs to keep the government informed on how much has been collected and paid based on the sales and purchases. Business Activity Statement (BAS) is the method to inform those details to the government. If the BAS specifies that the business needs to pay GST, the payments need to be made on the same day as the lodgment unless agreed with the ATO on a payment plan. The number of times the BAS needs to be filled varies based on the business size measured with annual turnover.
If the business has more than $ 20 million annual turnover BAS needs to be submitted monthly within 21 days of month closing.
For the annual turnover of less than $20 million, BAS submissions will be quarterly and for each quarter there are specified deadlines given. When the annual turnover is less than $10 million BAS lodging can be done annually but the GST payments need to be done quarterly.
For even smaller businesses which are having an annual turnover of less than $75,000 (or $150,000 for non-profits), BAS can be suited annually with the income tax.
Australian Taxation Office (ATO) uses this BAS information to calculate the GST refunds and payments. BAS will be used to estimate Employee income tax, fringe benefits tax, luxury car tax, wine equalization tax and fuel tax credits. Also, if a business is in the pay-as-you-go system, BAS will be used for business income tax purposes.
Consequences of Failure to lodge BAS
When a business fails to lodge the BAS on time, they have to face consequences. One such consequence is; Failure to Lodge (FTL) on time penalty. There will be a notice of failure to lodge and afterward a penalty will be calculated based on the scalability of the business. ATO can make directors or owners personally responsible if the businesses lodge late BAS.
Many lending agents require details of on-time lodgment of BAS returns when businesses ask for lending facilities. Lenders show reluctance to lend if the businesses have late BAS- submissions. Equally, if the business is trying to go for a payment agreement with the ATO, they will also consider the compliance history. On-time BAS settlement is one of the factors to look into in determining if the business is eligible for a payment agreement.
Many businesses think it’s a hassle to lodge BAS when the business is not performing well. But actually, the business risk becomes higher with not lodging the BAS as it can affect the company borrowing ability in the future. Regardless of the amount of liability, it is necessary to ensure that the BAS is lodged on time because not having the BAS lodged negatively affects the business and drags the directors or owners into a position where they will be personally liable for these debts.
Challenges faced by the Book Keepers to meet the BAS deadlines
Before the lodgment of BAS, bookkeepers need to ensure that the accounts are reconciling, accurate and up-to-date. Purchases cash expenses need to be properly recorded, information concerning the creditors needs to be correct, bank reconciliations should be tallying and all the outstanding funds need to be justified. To make these happen all the receipts, invoices for those transactions need to be received on time. In practicality, there are many instances where the information doesn’t come on time especially when the businesses are involved with overseas operations. In such cases, it becomes challenging for the bookkeepers to meet the deadlines.
Having inaccurate financial reports may not be compliant to lodge for BAS. Modern accounting software packages make the BAS reporting process highly efficient and manageable. However, many small enterprises use Excel or manual methods to record information. Recording accounting data manually can lead to many inaccuracy issues and it kills a lot of time.
A major challenge faced by many small bookkeepers is the cash flow as the small businesses find it difficult to have tight control over cash flow. Failing to keep track of the timings of all the accounts payable and receivable often results in severe cashflow issues. If managing the working capital doesn’t happen properly it will be the bookkeeper who finds it difficult to lodge the BAS on time.
Tax estimation, provisioning also has to be done accurately by the bookkeepers. Although the cash flow is managed, if the accounts don’t indicate provisioning for the liability that can arise, there will be challenges on the payment for the BAS lodgment. The lodgment can get delayed till the business finds cash to settle the liability.
Another challenge faced by bookkeepers is the; submission of tax invoices and supporting documents. Although the tax invoices and other supporting documents are not necessary to lodge the BAS, it is important to have those invoices and other details because there are times ATO requests those details. So, the bookkeepers find it difficult if the supporting documents are missing and it will indicate a misrepresentation of data if the bookkeepers have shown the numbers in the BAS lodgment but couldn’t trace the supporting later on.