How to Do Your BAS: A Step-by-Step Guide for Australian Businesses

What Is a BAS?

A Business Activity Statement (BAS) is a form submitted to the Australian Taxation Office (ATO) to report and pay several tax obligations, including GST, PAYG withholding, PAYG instalments, and fringe benefits tax instalments.

Most small businesses lodge their BAS quarterly, though monthly lodgement is required for businesses with annual GST turnover of $20 million or more. Some businesses choose to lodge monthly voluntarily for better cash flow management.

Before You Start: Preparation Checklist

Good BAS preparation starts with good bookkeeping throughout the quarter. Before you sit down to complete your BAS, make sure:

1. All bank accounts are reconciled up to the end of the quarter
2. All sales invoices for the quarter have been raised
3. All supplier bills for the quarter have been entered
4. All transactions are categorised with the correct GST code
5. Any adjustments or journal entries for the quarter have been completed
6. Your accounts receivable and payable are up to date

If you have been keeping your books up to date throughout the quarter (ideally with the help of automation tools like SortBooks), this preparation step should be minimal.

Step 1: Review Your GST Report

In Xero, go to Reports then GST Report (or BAS Report). Select the relevant quarter and review the report.

The GST report shows:

• Total sales (G1) - All income for the quarter
• GST on sales (1A) - The GST you collected from customers
• Total purchases (G11) - All expenses for the quarter
• GST on purchases (1B) - The GST you paid to suppliers

The difference between GST collected and GST paid is the amount you owe to (or are owed by) the ATO.

What to Check

Correct GST codes - Review the detail behind each line to ensure transactions have the right GST code. Common codes include:

• GST on Income (10%) for standard taxable sales
• GST on Expenses (10%) for standard taxable purchases
• GST Free for GST-free supplies (basic food, medical, education, exports)
• BAS Excluded for items outside the GST system (wages, bank transfers, private items)
• Input Taxed for financial supplies and residential rent

Unusual amounts - If any category looks significantly different from previous quarters, investigate. A spike in GST-free purchases or a drop in GST on sales might indicate miscoding.

Private expenses - Ensure no personal expenses have been included in the business accounts. Private items should not be in your BAS.

Step 2: PAYG Withholding

If you have employees, your BAS includes the PAYG amounts withheld from their wages. Xero payroll automatically calculates these amounts.

Review your payroll reports to confirm:

• The PAYG withheld matches your payroll records
• All pay runs for the quarter have been finalised
• Any termination payments have been processed with correct PAYG

Step 3: PAYG Instalments

If you pay PAYG instalments (tax on your business income), the ATO will pre-fill the instalment amount or rate on your BAS. You can choose to:

• Pay the ATO's instalment amount (Option 1) - Simple, based on the ATO's calculation
• Calculate your own instalment (Option 2) - Based on your actual income for the quarter

If your business income has changed significantly, calculating your own instalment might result in a more accurate payment.

Step 4: Complete the BAS in Xero

Xero can generate your BAS directly from your financial data:

1. Go to Reports then Activity Statement
2. Select the quarter
3. Review each field against your underlying data
4. Make any necessary adjustments
5. Finalise the BAS

Alternatively, you can use the ATO's online services (Business Portal or myGov) to lodge the BAS, entering the figures from your Xero reports.

Step 5: Lodge and Pay

Lodgement Deadlines

Quarterly BAS deadlines for most small businesses:

• Q1 (July-September): 28 October
• Q2 (October-December): 28 February
• Q3 (January-March): 28 April
• Q4 (April-June): 28 July

If you use a registered BAS agent, you may get extended deadlines.

Payment Options

Pay your BAS via:

• BPAY using the details on your BAS
• Direct debit from your bank account
• Credit card through the ATO Business Portal
• Australia Post (for cash or cheque payments)

Common BAS Mistakes

Incorrect GST Coding

The most common mistake is applying the wrong GST code. This results in over-reporting or under-reporting GST. Common errors include:

• Coding bank fees as "GST on Expenses" instead of "BAS Excluded"
• Coding wages as "GST on Expenses" instead of "BAS Excluded"
• Coding international purchases as "GST on Expenses" instead of "GST Free"
• Missing GST on expenses that were paid in cash

Timing Errors

Including transactions from the wrong quarter happens when bookkeeping falls behind and transactions are entered in bulk. Use the invoice date or transaction date, not the entry date, for BAS purposes.

Missing Adjustments

If you use a GST adjustment for private use of business assets, bad debts written off, or other adjustments, make sure these are included in the correct quarter.

How Automation Helps

When your bookkeeping is automated with SortBooks, BAS preparation becomes a review process rather than a data entry marathon. Transactions are categorised with the correct GST codes as they come through bank feeds. By the time the quarter ends, most of the work is already done.

Your BAS preparation workflow becomes:

1. Run the GST report in Xero
2. Review the numbers for anything unusual
3. Confirm PAYG figures from payroll
4. Lodge and pay

What used to take hours now takes 30 minutes or less.