How to Lodge Your BAS Through Xero (Step by Step)

How to Lodge Your BAS Through Xero

The Business Activity Statement (BAS) is a quarterly (or monthly) obligation for GST-registered businesses in Australia. Xero makes the process significantly easier by automatically calculating your GST figures from your transaction data. Here is how to prepare and lodge your BAS step by step.

Before You Start: Preparation Checklist

Before generating your BAS, make sure your books are in order:

1. Reconcile All Bank Accounts

Every bank account, credit card, and payment platform should be fully reconciled up to the end of the BAS period. Unreconciled transactions mean your GST figures are incomplete.

2. Check Transaction Categorisation

Review your transactions to ensure they have the correct tax codes applied:

• GST on Income (GST) - Most sales of goods and services
• GST on Expenses - Most business purchases
• GST Free Income - Exports, some food, some health services
• GST Free Expenses - Items without GST (wages, bank fees, some insurance)
• BAS Excluded - Items that are not reported on the BAS (owner contributions, transfers between accounts)
• Input Taxed - Financial supplies, residential rent

Incorrect tax codes are the most common cause of BAS errors. AI-powered tools like SortBooks help by consistently applying the correct tax codes based on learned patterns.

3. Process Any Outstanding Invoices and Bills

Make sure all invoices and bills for the period have been entered. If you use accrual accounting for GST, you report GST when you issue invoices and receive bills, not when cash changes hands.

4. Review GST on Imports

If you import goods, check that any GST paid at the border (deferred GST or GST on imported goods) is correctly recorded.

Generating the BAS in Xero

Step 1: Navigate to the Activity Statement

Go to Accounting then Reports then Activity Statement. Select the relevant BAS period.

Step 2: Review the BAS Figures

Xero generates the BAS automatically from your transaction data. The key fields are:

G1 - Total sales (including GST-free sales)

G2 - Export sales

G3 - Other GST-free sales

G10 - Capital purchases

G11 - Non-capital purchases

1A - GST on sales (the GST you collected from customers)

1B - GST on purchases (the GST you paid to suppliers)

The difference between 1A and 1B is what you owe the ATO (if 1A is larger) or what the ATO owes you (if 1B is larger).

Step 3: Check PAYG Withholding (W1-W5)

If you have employees, your BAS also reports PAYG withholding:

W1 - Total payments to employees

W2 - Amounts withheld from employees (tax)

These figures come from your payroll data in Xero.

Step 4: Check PAYG Instalments (T1-T9)

If you pay quarterly PAYG tax instalments on your business income, these are also reported on the BAS. The ATO usually pre-populates the instalment amount based on your previous year's income.

Step 5: Review and Verify

Before lodging, verify the figures make sense:

• Does the total sales figure (G1) roughly match your revenue for the quarter?
• Does the GST collected (1A) roughly equal 1/11 of your GST-inclusive sales?
• Does the GST paid (1B) seem reasonable relative to your expenses?
• Do the PAYG withholding amounts match your payroll reports?

If anything looks off, investigate before lodging. Common issues include:

• Transactions with incorrect tax codes
• Missing transactions (incomplete reconciliation)
• Personal transactions recorded as business expenses
• Inter-account transfers coded with GST

Step 6: Lodge the BAS

You have two options for lodging:

Option 1: Lodge directly through Xero - If your tax agent has enabled direct lodgement, you can submit the BAS directly from Xero to the ATO. Click "Lodge" and follow the prompts.

Option 2: Lodge through the ATO portal - If you prefer (or your accountant handles lodgement), export the figures from Xero and enter them into the ATO's business portal or myGov.

Step 7: Record the Payment

When you pay the ATO (or receive a refund), record the transaction in Xero and reconcile it against your bank feed. Assign it to the GST liability account.

BAS Lodgement Deadlines

• Quarterly BAS:

- Q1 (Jul-Sep): Due 28 October

- Q2 (Oct-Dec): Due 28 February

- Q3 (Jan-Mar): Due 28 April

- Q4 (Apr-Jun): Due 28 July (or 25 February for December quarter if lodging electronically)

• Monthly BAS: Due on the 21st of the following month.

If you use a registered tax agent, you may receive extended deadlines.

Common BAS Mistakes

Wrong tax codes: The most frequent error. Always check that transactions have the correct GST treatment.

Missing transactions: Incomplete reconciliation means incomplete GST figures. Reconcile fully before generating the BAS.

Private expenses: Personal expenses recorded as business purchases inflate your GST credits. The ATO audits for this.

Incorrect PAYG amounts: If your payroll figures do not match your STP reports, investigate before lodging.

Not reviewing before lodging: Never lodge without reviewing the figures first. A five-minute review can prevent a costly correction later.

Tips for Smoother BAS Lodgement

1. Keep your books up to date throughout the quarter - do not leave everything to the last week
2. Reconcile bank accounts weekly so there is minimal catch-up at BAS time
3. Use bank rules and AI categorisation to ensure consistent tax code application
4. Review your GST position monthly so there are no surprises at quarter-end
5. Set aside the GST you owe in a separate savings account so you have the funds ready when the BAS is due

BAS lodgement should not be stressful. When your bookkeeping is consistent and accurate throughout the quarter, the BAS is simply a summary of work already done. Xero generates the figures; you just need to verify and submit.