How to Lodge an Activity Statement in Australia: A Step-by-Step Guide

Lodging your activity statement is a fundamental compliance task for any business operating in Australia. It is the required method for reporting key tax obligations, such as Goods and Services Tax (GST) and Pay As You Go (PAYG) withholding, to the Australian Taxation Office (ATO).

Understanding this process is critical for maintaining regulatory compliance and avoiding significant financial penalties. The primary methods for lodging include using the ATO's Online services for business, myGov for sole traders, or engaging a registered tax or BAS agent. This guide provides a clear, step-by-step approach to ensure you meet your obligations accurately and on time.

Why Lodging Your Activity Statement Correctly Matters

For any Australian business, the Activity Statement—whether a Business Activity Statement (BAS) or an Instalment Activity Statement (IAS)—is more than just administrative paperwork. It is a mandatory declaration to the ATO that forms the foundation of your compliance with Australia's tax system.

This statement is the primary tool for reporting and paying several key tax obligations simultaneously. It ensures the government receives the tax you have collected on its behalf while also allowing you to claim any eligible tax credits.

Key tax obligations reported on an activity statement include:

• Goods and Services Tax (GST): This covers the GST you have charged customers and the GST paid on your business-related purchases.

• Pay As You Go (PAYG) Withholding: This is the tax withheld from employee wages or payments made to certain contractors.

• Pay As You Go (PAYG) Instalments: These are pre-payments made towards your business's estimated annual income tax liability.

The Compliance Risks and Penalties of Errors

The consequences of lodging late or submitting incorrect figures can severely impact your business's cash flow and financial stability. The ATO enforces strict deadlines and accuracy standards, with penalties designed to deter non-compliance.

These are not minor fees; they can accumulate rapidly and create significant financial pressure. Failure to lodge on time is a common compliance failure for many businesses.

The Failure to Lodge (FTL) penalty, for instance, can be a major financial drain. According to ATO regulations, this penalty is applied at a rate of one penalty unit (currently $330) for every 28-day period (or part thereof) that the statement is overdue, up to a maximum of five penalty units. For a small business, this can reach $1,650 per outstanding statement.

In addition to the FTL penalty, any unpaid tax liability accrues a General Interest Charge (GIC), which compounds daily. This further magnifies the financial burden of late lodgement. For a detailed breakdown of these risks, you can read our guide on penalties for late tax return lodgement.

Mastering your activity statement lodgement is a core business function, reflecting your company's financial discipline and commitment to compliance. It is a critical component of broader compliance management strategies that are vital for long-term business success.

Understanding ATO Lodgement Deadlines and Extensions

Meeting your Australian Taxation Office (ATO) deadlines is a non-negotiable aspect of running a business. It ensures you remain in good standing with the regulator and helps you avoid penalties. The due date for your activity statement varies depending on your business turnover, registrations, and your chosen lodgement method. Understanding these dates is the first step towards establishing a smooth compliance rhythm.

Most small businesses operate on a quarterly reporting cycle, which provides a balance between managing cash flow and avoiding excessive monthly administration. However, the ATO may require larger businesses or those with significant tax obligations to lodge monthly. An annual lodgement option is also available for certain small businesses that have voluntarily registered for GST.

Standard Due Dates vs. The Registered Agent Advantage

A significant strategic advantage can be gained by working with a registered tax or BAS agent. A key benefit is access to the ATO's concessional lodgement program, which provides extended deadlines that are not available if you lodge yourself.

This additional time is invaluable, offering a buffer to finalise your accounts, ensure accuracy, and manage cash flow before payment is due. The extension is not minor; it can be several weeks, which can be the difference between a rushed, error-prone lodgement and a calm, accurate one.

Professional Advice: Always lodge on time, even if you cannot pay the associated liability immediately. The Failure to Lodge penalty is separate from the interest charged on unpaid tax. Submit your statement by the due date, then contact the ATO or your agent to discuss a payment plan.

To illustrate the benefit, let's compare the quarterly BAS deadlines for self-lodgers versus those using an agent.

ATO Quarterly BAS Lodgement Due Dates (Standard vs. Registered Agent)

The extended deadlines provided to agents are a formal recognition by the ATO that professional preparation often leads to more accurate reporting. The table below clearly outlines the additional time available.

Financial Year Quarter	Standard Due Date	Registered Agent Due Date
Quarter 1 (Jul–Sep)	28 October	25 November
Quarter 2 (Oct–Dec)	28 February	28 February (no extension)
Quarter 3 (Jan–Mar)	28 April	26 May
Quarter 4 (Apr–Jun)	28 July	25 August

Note: Quarter 2 due date remains 28 February for all lodgers to align with the individual tax return deadline.

This schedule highlights a key strategic advantage. For Quarter 3, the agent deadline is nearly a month later, providing significant relief during a busy period.

What to Do If You Expect to Miss a Deadline

If meeting a deadline becomes impossible despite your best efforts, proactive communication is essential.

• If you use an agent: Contact them immediately. They can often request a lodgement deferral on your behalf, especially for valid reasons such as illness, natural disaster, or other serious unforeseen circumstances.

• If you lodge yourself: You must contact the ATO directly to request an extension. It is critical to do this before the due date passes.

The ATO is generally more receptive to taxpayers who are proactive about their difficulties. For a comprehensive overview of tax timelines, refer to our guide on the Australia tax return due date for 2025.

How to Choose the Right Lodgement Method for Your Business

Selecting the appropriate method for lodging your activity statement is a crucial decision that can significantly reduce administrative burden and improve accuracy. The ATO offers several pathways, each suited to different business structures and levels of complexity.

The four main lodgement methods are: via the ATO’s Online services for business, through your myGov account (sole traders only), using Standard Business Reporting (SBR)-enabled software, or by engaging a registered tax or BAS agent.

Lodging Directly with the ATO

For business owners with straightforward tax affairs who prefer to manage compliance in-house, lodging directly with the ATO is a viable option.

• Online services for business: This is the ATO's secure portal for companies, trusts, and partnerships. It allows you to prepare and lodge activity statements, view accounts, and communicate with the ATO. This method is suitable if you possess strong in-house bookkeeping capabilities.

• myGov for Sole Traders: Sole traders can link their ABN to their personal myGov account, creating a single access point for both personal and business tax matters. This is convenient for lodging simple BAS or IAS forms.

The direct approach offers full control, but all responsibility for accuracy rests with you.

Leveraging SBR-Enabled Software

Many accounting software packages, such as Xero, MYOB, or QuickBooks, are SBR-enabled. This functionality allows you to prepare and lodge your activity statement directly from the platform used for your business finances.

This method is highly efficient, as the software populates the statement with data from your reconciled accounts, significantly reducing the risk of manual data entry errors. For a growing business, this integration is essential for aligning financial records with ATO reporting.

Expert Insight: A key advantage of SBR-enabled software is its ability to pre-fill information and flag potential anomalies. This serves as a valuable first-line review before lodgement, helping to catch simple errors that could otherwise cause delays or ATO scrutiny.

Engaging a Registered Tax or BAS Agent

For many businesses—particularly those with employees, complex GST transactions, or limited internal resources—engaging a professional is the most prudent approach. A registered agent provides more than just form-filling; they offer expert oversight and strategic advice.

An agent will ensure your calculations are correct, all eligible credits are claimed, and the entire lodgement process is managed in compliance with ATO requirements. This is invaluable for companies navigating complex PAYG withholding obligations or for any business owner who prefers to focus on core operations.

Comparison of Activity Statement Lodgement Methods

The optimal method depends on your business's specific circumstances. A sole trader has different needs than a large corporation. The following table provides a clear comparison to aid your decision-making.

Lodgement Method	Best For	Pros	Cons
ATO Online Services for Business	Companies, trusts, and partnerships with straightforward tax affairs.	Full control and visibility over lodgements. No direct software costs.	Requires strong tax knowledge. Sole responsibility for accuracy.
myGov	Sole traders with simple business structures.	Convenient single access point for personal and business tax. Fast for simple ('nil') lodgements.	Unsuitable for complex structures. Limited functionality.
SBR-Enabled Software (e.g., Xero, MYOB)	Small to medium-sized businesses using accounting software.	Reduces manual errors. Streamlines reporting with existing financial data.	Involves software subscription fees. Requires user understanding of BAS figures.
Registered Tax or BAS Agent	Businesses of any size, especially those with employees or complex GST.	Expert oversight ensures accuracy. Access to extended lodgement deadlines. Peace of mind.	Incurs professional fees. Requires agent nomination with the ATO.

Choosing the right method involves balancing control, cost, and complexity. The ATO's BAS agent lodgment program provides detailed information on the benefits and requirements of using a registered professional.

A Step-by-Step Guide to Completing Your Activity Statement

Completing your first activity statement can seem daunting due to labels like G1, 1A, and W2. However, once you understand what each label represents, the process becomes a logical exercise in reporting your business's financial activity to the Australian Taxation Office (ATO).

This section provides a practical walkthrough of the most common sections on a Business Activity Statement (BAS), with clear examples to guide your calculations.

There are three primary approaches to completing your statement: the DIY method, using accounting software for assistance, or outsourcing to a professional agent.

The path you choose will depend on your confidence, time, and the complexity of your business affairs.

Step 1: Decoding the GST Section

For most businesses, this is the core of the BAS. The Goods and Services Tax (GST) section reconciles the GST you have collected from customers with the GST you have paid on business expenses.

Key labels include:

• G1 Total Sales: Report the total value of all sales made during the period, including GST-free and input-taxed sales. Crucially, this figure should be exclusive of any GST amount collected.

• 1A GST on Sales: This is the total GST you collected. A simple calculation is to take your total gross sales figure (including GST) and divide it by 11.

• 1B GST on Purchases: This is where you claim credits for the GST paid on business-related purchases. You can only claim credits for acquisitions that included GST and for which you hold a valid tax invoice.

Common Pitfall: A frequent error is attempting to claim GST credits on items that are GST-free, such as basic food, bank fees, interest on loans, and employee wages. Maintaining accurate records is essential for avoiding this mistake.

Practical Example: A Retail Store's GST Calculation

A small retail business has the following figures for the quarter:

• Total sales (including GST): $55,000

• Total business purchases (including GST): $22,000

Here is how to report these figures on the BAS:

• G1 Total Sales: $50,000 ($55,000 ÷ 1.1)

• 1A GST on Sales: $5,000 ($55,000 ÷ 11)

• 1B GST on Purchases: $2,000 ($22,000 ÷ 11)

The net GST payable to the ATO is $3,000 ($5,000 at 1A minus $2,000 at 1B).

Step 2: Managing PAYG Withholding for Employees

If you have employees, you must withhold tax from their wages and remit it to the ATO. This is reported in the Pay As You Go (PAYG) withholding section.

• W1 Total Salary, Wages and Other Payments: Report the gross amount paid to employees and certain contractors before any tax is withheld.

• W2 Amount Withheld from W1: Report the total income tax you withheld from the gross payments reported at W1.

These figures must reconcile with your payroll records. The ATO receives this data in real-time via Single Touch Payroll (STP), so accuracy is non-negotiable.

Step 3: Reporting PAYG Instalments

To help businesses manage their annual income tax liability, the ATO requires pre-payments through PAYG instalments.

The BAS provides two calculation options:

1. Instalment Amount (Option 1): The ATO pre-calculates an instalment amount based on your most recently lodged tax return. You simply report and pay this figure. This is simple but may not reflect current trading conditions.

2. Instalment Rate (Option 2): You calculate your instalment by multiplying your actual income for the quarter by a rate provided by the ATO. This is ideal for businesses with fluctuating income as it aligns tax payments with cash flow.

Practical Example: A Sole Trader Consultant's PAYG Instalment

A marketing consultant earns $30,000 in a quarter and has been given a PAYG instalment rate of 12% by the ATO.

Using Option 2, the calculation is:

• T1 PAYG Instalment Income: $30,000

• T2 Rate: 12%

• T3 New Varied Amount: $3,600 ($30,000 x 0.12)

This $3,600 amount would be reported at label 5A (PAYG income tax instalment) on their BAS.

How to Correct an Error or Manage a Late Payment

Even with careful preparation, errors can occur. If you discover a mistake on a lodged activity statement, the ATO has clear procedures for correction. Similarly, if you are unable to meet a payment deadline, proactive communication is the best course of action.

Addressing these issues promptly is essential for maintaining compliance and a positive relationship with the ATO. Ignoring an error or a payment obligation will lead to escalating penalties and interest charges.

Correcting an Error on a Lodged BAS

If you identify an error after lodging, do not panic. The appropriate correction method depends on the nature and value of the mistake.

For most simple errors, you can revise the original activity statement through the same channel you used for the initial lodgement:

• Online services for business

• Your myGov account (sole traders)

• Through your registered tax or BAS agent

Revising the original statement is the cleanest method as it directly corrects the record for that specific tax period. The process is similar to amending other tax documents, which is explained in our guide on how to amend a tax return in Australia.

The ATO imposes time limits and monetary thresholds for making revisions. For significant errors or those outside these limits, a formal amendment request may be required. When in doubt, consult the ATO website or your tax professional.

What to Do When You Can Lodge but Not Pay

It is a common scenario for a business to have completed its BAS but lack the immediate cash flow to pay the liability. In this situation, the most critical action is to lodge the activity statement on time.

Lodging on time fulfils your reporting obligation and helps you avoid a separate Failure to Lodge (FTL) penalty. Once lodged, the ATO is aware of your debt, and you can then address the payment issue separately.

Key Takeaway: The ATO distinguishes between a failure to report and a failure to pay. By lodging on time, you demonstrate a commitment to compliance, which strengthens your position when negotiating a payment solution.

The next step is to contact the ATO to arrange a payment plan. This can often be done through Online services for business or by phone. A payment plan allows you to pay the debt in manageable instalments over an agreed period.

Setting Up a Payment Arrangement

The ATO is generally willing to work with businesses that are genuinely attempting to meet their obligations. When requesting a payment plan, be prepared to explain your financial situation and propose a realistic payment schedule.

It is important to note that the General Interest Charge (GIC) will continue to accrue on the outstanding balance until it is paid in full. Therefore, your objective should be to clear the debt as quickly as your cash flow permits.

Frequently Asked Questions (FAQ)

What happens if I lodge my activity statement late?

Lodging an activity statement after the due date can result in a Failure to Lodge (FTL) penalty from the ATO. For a small business, this penalty is calculated at a rate of one penalty unit ($330 as of the 2024–25 financial year) for each 28-day period the statement is overdue, up to a maximum of five penalty units ($1,650). Additionally, any tax owed will accrue a General Interest Charge (GIC) from the original due date. To avoid the FTL penalty, it is crucial to lodge on time, even if you are unable to pay the full amount immediately.

Do I have to lodge an activity statement if I have no business activity?

Yes. If you are registered for GST, you are legally required to lodge an activity statement for every tax period, even if you had no sales or purchases. This is known as lodging a 'nil' activity statement, where you report zeros for all relevant labels. This action confirms to the ATO that you have met your reporting obligations for the period. Failure to lodge a nil activity statement is treated as a failure to lodge and can attract the same FTL penalties.

How do I correct a mistake on a previous BAS?

Mistakes on a previously lodged BAS can usually be corrected by revising the original statement. This can be done through the same method you used to lodge it, such as ATO's Online services for business, myGov, or via your registered tax agent. The ATO has specific time limits (generally four years) and value thresholds for making corrections this way. For minor errors, you may be able to correct them on your next BAS, but for significant discrepancies, revising the original is the correct procedure. For guidance, refer to the ATO's information on correcting a BAS.

What is the difference between a BAS and an IAS?

The key difference between a Business Activity Statement (BAS) and an Instalment Activity Statement (IAS) is GST registration.

• A BAS is issued to businesses registered for GST. It is used to report on multiple tax obligations, including GST, PAYG withholding, and PAYG instalments.

• An IAS is issued to businesses or individuals who are not registered for GST but have other reporting obligations, most commonly PAYG withholding for employees or PAYG instalments on their income.The ATO automatically issues the correct type of statement based on your tax registrations.

Summary: Key Takeaways

• Understand Your Obligations: Activity statements (BAS or IAS) are mandatory for reporting GST, PAYG withholding, and PAYG instalments to the ATO.

• Know Your Deadlines: Deadlines vary. Using a registered agent provides access to extended lodgement dates, offering valuable extra time.

• Choose the Right Method: Lodge via ATO online services, myGov (sole traders), SBR-enabled software, or a registered agent. The best choice depends on your business complexity and resources.

• Lodge on Time, Every Time: Always lodge by the due date, even if you cannot pay. This avoids the separate Failure to Lodge (FTL) penalty.

• Communicate Proactively: If you make an error or cannot pay, contact the ATO or your agent immediately to arrange a correction or a payment plan.

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Managing your activity statements correctly is essential for your business's financial health and compliance. If you require expert assistance or wish to outsource your lodgement obligations, the team at Baron Tax and Accounting is ready to help.

Contact Us

• Baron Tax and Accounting

• Website: https://www.baronaccounting.com

• Email: info@baronaccounting.com

• Phone: +61 1300 087 213

Contact us today for personalised advice on your business tax obligations.