The Difference Between A BAS And An Income Tax Return Lodgement

For all business owners, especially those who are sole traders, it is important to know the difference between a Business Activity Statement (BAS) and an Income Tax Return. Both will need to be completed regularly and carry their own individual obligations.
It can become difficult for Sole Traders to understand the distinct differences between their income reporting obligations on a BAS and an Income Tax Return. This is confounded by the fact that both ask you to report your income and expenses. However, there are distinct differences that we will take you through now.

What is a BAS? 

A BAS is used to report business taxes like GST, PAYG Withholding, PAYG Instalment, Wine Equalization Tax, Fringe Benefit Tax and Luxury Car Tax. You will need to lodge a BAS either quarterly, monthly, or in some cases, annually. When you lodge your BAS you will also need to send the ATO all tax money you have collected on their behalf.

What is an Income Tax Return 

An Income Tax Return is used to report your annual income and expenses. This is where the ATO calculates the income tax you owe, or returns they owe you. All individuals must declare their taxable income by the 31st of October. When lodging your Income Tax Return you do not need to calculate the amount of tax you are liable to pay. Instead the ATO will do this for you, determining whether you owe tax or will receive a refund.

An example for how you would report income and expenses in each 

On both your BAS and Income Tax Return you should provide your income and business expenses. However, the difference lies in GST. If you are registered for GST you must report your income and expenses on your BAS with GST and without GST on your Income Tax Return. Here is an example:
If you received an income gross of $110,000, made up of $100,000 plus $10,000 GST (10% on top of the $100,000), and have spent $5,500 gross in expenses, made up of $5,000 plus $500 GST.  

You would report on your BAS as:
$110,000 for income and $5,500 for expenses, with $10,000 of GST collected on your sales and $500 GST to be claimed as GST credits (subject to eligibility).

However, On your Income Tax Return you would report:
$100,000 for income and $5,000 for expenses, with no GST involved.

How to ensure your BAS is correct 

The easiest way to ensure that you are reporting correctly on your BAS is to lodge through As registered tax agents, we can provide you support when it comes to lodging your BAS. We can help you determine what should and should not be reported on your BAS. If you have lodged your BAS incorrectly, we will be able to assist you, fixing mistakes before it is lodged to the ATO.
At lodging your BAS is headache free. If you require it, we can also provide a 4-week extension to your lodgement date when you lodge your BAS through us. Check us out today. 

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