BAS and GST for small business: a plain-English quarterly guide

The quarterly tax form most small businesses dread, explained with real dollar figures and the traps that catch people.

By ECTD Editorial · Published 2026-05-22 · Updated 2026-05-22

If you run a small business in Australia, the Business Activity Statement (BAS) is the form you'll meet most often. It's how you tell the ATO what GST you collected, what GST you're claiming back, and — for many businesses — how much income tax you're paying in advance. It looks intimidating because it's full of boxes labelled with codes like G1 and 1A. It isn't actually hard. This guide walks through the whole thing in plain English, with real dollar figures, so you know exactly what each number means and what to do every quarter.

Do you even need to register for GST?

GST is a 10% tax on most goods and services sold in Australia. But you don't charge it — or deal with a BAS at all — until you're registered. The trigger is the $75,000 GST turnover threshold. If your business turnover is $75,000 or more in a 12-month period, you must register. Crucially, that's not just your last financial year — it includes a forward-looking test. If you reasonably expect your turnover to hit $75,000 in the current or next 12 months, you're required to register, even if last year was quieter.

Turnover here means your gross business income (excluding GST), not your profit. A sole trader who invoices $80,000 and has $50,000 of expenses still has a turnover of $80,000 and must register. The threshold is $150,000 for non-profit organisations, and there's no threshold at all for taxi, ride-share and limousine drivers — Uber and DiDi drivers must register from their first dollar.

Below $75,000, registration is optional. There are two schools of thought. Registering voluntarily lets you claim GST credits on your purchases, which helps if you're spending heavily on stock or equipment before you're earning much. The downside is you then have to add 10% to your prices (or absorb it), and you're committed to lodging a BAS. For a side hustle selling to ordinary consumers who can't claim the GST back, staying unregistered often keeps your prices more competitive and your paperwork lighter.

Watch the threshold creep up on you: The most common GST mistake is missing the moment you cross $75,000. The test is rolling, not the financial year. If a big month pushes your projected 12-month turnover over the line, you have 21 days to register. Miss it and the ATO can make you pay the GST you should have collected — out of your own pocket, because you can't go back and re-invoice customers for it. Check your trailing 12-month turnover monthly once you're anywhere near $60,000.

How to register, and what an ABN has to do with it

You register for GST through the ATO, usually via Online services for business or through your accountant or registered BAS/tax agent. You'll need an Australian Business Number (ABN) first — you can't register for GST without one. Many people do both at once when they start a business. Once registered, the ATO tells you your reporting cycle (almost always quarterly for small business) and you'll start receiving BAS forms.

From the day you're registered, you must show GST on your tax invoices. A valid tax invoice for sales over $82.50 (including GST) needs your business name, your ABN, the date, a description of what was sold, the GST amount (or a statement that it's included), and — for invoices of $1,000 or more — the buyer's identity or ABN.

What a BAS actually is

The BAS is a single statement that reports several taxes at once. For a typical small business it covers two things: GST, and PAYG income tax instalments. Some businesses also report PAYG withholding (tax taken from employees' wages), fuel tax credits, or other items, but for most sole traders and small companies it comes down to GST in, GST out, and a prepayment of income tax.

Think of the GST part as a simple sum: the GST you collected on sales, minus the GST you paid on business purchases. If you collected more than you paid, you send the difference to the ATO. If you paid more than you collected — common when you've bought a lot of stock or a major piece of equipment — the ATO refunds you the difference. You are, in effect, a collection agent for the government: the GST on your sales was never your money.

GST collected vs GST credits — a worked example

Say you run a small landscaping business. Over the quarter you invoice clients $66,000 including GST. That price is made up of $60,000 for your work plus $6,000 of GST you collected on top. That $6,000 is your GST collected (it goes in the box labelled 1A).

During the same quarter you bought a $5,500 mower, $3,300 of materials, and $1,100 of fuel and sundries — $9,900 total including GST. The GST component of those purchases is $900 (one-eleventh of $9,900). That's your GST credits, also called input tax credits (box 1B).

GST collected on sales (1A): $6,000
GST credits on purchases (1B): $900
Net GST you owe the ATO: $6,000 − $900 = $5,100

If those numbers were reversed — say you'd bought a $40,000 ute that quarter and your sales were quiet — your GST credits could exceed your GST collected, and the ATO would refund the difference to your nominated bank account, usually within a couple of weeks of lodging.

Not everything has GST on it: Some sales and purchases are GST-free (most basic food, most health and medical services, exports) or input-taxed (residential rent, most financial services). You don't add GST to GST-free sales, and you can't claim a credit on input-taxed purchases. Bank fees, most government charges, and wages have no GST either. Claiming a credit on a GST-free purchase is a classic error — there was no GST to claim. To work out the GST inside a GST-inclusive price, divide by 11.

Cash vs accrual: which accounting basis to choose

When you register, you choose how you account for GST. This decides when a sale or purchase lands on your BAS, and it matters more than people expect for cash flow.

On a cash basis, you report GST in the quarter you actually receive or pay the money. If you invoice a client in June but they pay in July, that GST falls into the next quarter's BAS. This keeps your BAS in step with your bank account — you're never paying GST on money you haven't been paid yet. Cash basis is generally available to businesses with a GST turnover under $10 million, and it's the sensible default for most small operators, especially anyone who waits 30–60 days to get paid.

On an accruals (non-cash) basis, you report GST when you issue or receive the invoice, regardless of whether the money has changed hands. That means you can owe the ATO GST on a $66,000 invoice in this quarter even if the client hasn't paid you yet. The upside is you can also claim GST credits on bills you've received but not yet paid. Larger businesses, and those that buy a lot on supplier credit, often prefer accruals — but for a tradie or consultant chasing late payers, it can create a nasty timing squeeze.

Match your basis to your reality: If you frequently invoice now and get paid much later, the cash basis usually protects your cash flow better — you remit GST after the money arrives. If your customers pay on the spot (a cafe, a retail shop) the two methods produce nearly identical results and accruals can give a cleaner picture of profitability. You can ask the ATO to change your basis, but you generally can't flip back and forth quarter to quarter.

PAYG instalments — the other half of the BAS

Once your business income reaches a certain level, the ATO won't wait until tax time for your income tax — it asks you to pay it in instalments through the year, on the same BAS. This is PAYG instalments (not to be confused with PAYG withholding, which is tax you take out of employees' wages). It's effectively a prepayment of your own income tax on business and investment income.

The ATO usually works out an instalment amount for you, based on your last lodged tax return, and prints it on your BAS at label T7 — you just pay it. Alternatively you can use the instalment rate method, where the ATO gives you a percentage and you apply it to the quarter's actual income, which suits businesses with lumpy or seasonal earnings. The instalments you pay across the year are credited against your final income tax bill when you lodge your return, so you're not paying extra — you're paying it earlier and in smaller chunks.

Remember that income tax is calculated on profit using the 2025-26 individual rates for sole traders: nothing on the first $18,200, 16% from $18,201 to $45,000, 30% to $135,000, 37% to $190,000, and 45% above that. Companies pay a flat rate (lower for base-rate entities). PAYG instalments are just an attempt to spread that eventual bill across four payments so you're not hit with a single large amount at tax time.

When the BAS is due

Most small businesses lodge quarterly. The standard due dates for a quarterly BAS are:

Quarter 1 (July–September): due 28 October
Quarter 2 (October–December): due 28 February
Quarter 3 (January–March): due 28 April
Quarter 4 (April–June): due 28 July

The Q2 date is later than the others because it spans the Christmas–New Year shutdown. If you lodge through a registered BAS or tax agent, you usually get an extra few weeks beyond these dates — one of the quieter benefits of using an agent. Businesses with very high turnover may have to report monthly, and very small operators can sometimes report annually, but quarterly is the norm. You can lodge online through myGov/the Online services for business, through accounting software like Xero, MYOB or QuickBooks that connects directly to the ATO, or through your agent.

If a quarter has no activity at all, you still have to lodge a nil BAS — you can't simply ignore it. And the payment is due on the same date as the lodgement. The ATO charges a general interest charge on late payments and can issue failure-to-lodge penalties, so even if you can't pay, lodge on time and then contact the ATO to set up a payment plan.

Don't spend the GST: The single biggest BAS disaster for small business is treating GST as income. That $6,000 sitting in your account from the landscaping example was never yours — it belongs to the ATO. When the quarter ends and the bill lands, businesses that spent it scramble. The fix is mechanical: open a separate high-interest savings account and sweep roughly one-eleventh of every GST-inclusive sale into it as it comes in. Add a slice for your PAYG instalment too. Come BAS day, the money is simply there.

Common mistakes that cost real money

A handful of errors show up again and again. Avoiding them is most of what good BAS hygiene is about:

Claiming GST on the whole purchase price of something used partly for private purposes. If your phone is 70% business, you can only claim 70% of the GST credit. The same applies to a vehicle or home office costs.
Claiming GST on GST-free or no-GST items. No GST credit exists on wages, bank fees, most government charges, GST-free food, or purchases from suppliers who aren't registered for GST. Check the supplier's invoice actually shows GST and an ABN before you claim.
Claiming GST without a valid tax invoice. For purchases over $82.50 including GST, you need a proper tax invoice to support the credit. A bank statement line or an EFTPOS receipt without the supplier's details and ABN isn't enough if the ATO asks.
Mixing up the two PAYGs. PAYG instalments (your own income tax) and PAYG withholding (employees' tax) are different labels on the BAS. Reporting one as the other throws out both your obligations.
Lodging late or not at all. Penalties and interest accrue, and a pattern of late lodgement can flag your business for closer ATO attention.
Forgetting that a refund can be wrong too. An unusually large GST refund often means a coding error — for example, treating a GST-free import as having claimable GST. The ATO does cross-check, and overclaimed credits get clawed back with interest.

If you use accounting software and set up your tax codes correctly once, most of these are caught automatically — the software won't let you put GST on a wage payment, for instance. The investment of an hour with a bookkeeper to set up your chart of accounts and GST codes properly pays for itself the first time it stops you overclaiming.

A simple quarterly routine

Boiled down, here's the rhythm that keeps a small business on top of BAS without stress. Reconcile your bank account weekly or fortnightly so transactions are coded as you go. At quarter end, run your software's GST report, check it against your bank balance, and look for anything unusual — a missing big invoice, a refund that seems too large. Confirm your PAYG instalment amount. Lodge online or hand it to your agent before the due date. Pay from the GST savings account you've been quietly filling all quarter. That's the whole job.

General advice warning: This article is general information only and does not take into account your personal circumstances. It is not personal financial, tax or legal advice. GST and BAS rules have exceptions and the right approach depends on your specific situation. Before acting, check the current rules at ato.gov.au or speak with a registered tax agent or BAS agent.

General information only — not personal financial, tax, legal or medical advice. Consider your own situation and consult a licensed professional before acting. Figures are current as at the date shown above.