Businesses choosing to use the new BAS lodgment system announced last week by the federal government need to be aware they are still required to keep clear records.
While these records will not be needed to calculate the information for BAS purposes (if businesses choose the estimate method of quarterly reporting), they will still be needed for basic business record keeping – primarily to ensure any Tax Office (ATO) audit runs smoothly.
Rick Matthews, the ATO's deputy commissioner GST, told a Senate Estimates Committee hearing that while the changes mean businesses only need fill out the "essential information" boxes, they still need to keep records relating to the other boxes.
In relation to audits and other compliance features of the tax system, Matthews said data would be accessed through business records and the changes would not reduce the information flow to the ATO.
Committee transcript
Senator Peter Cook:
The tax commissioner outlined in his speech in July 2000 to the IFSA conference that the BAS was integral to the new compliance strategy of the ATO. He stated, and I quote – Potentially rich new sources of intelligence will flow to us under the new tax system. In particular, the BAS was mentioned as a new source of data which would allow data matching and other benefits in relation to tax compliance. That was the position then. What is the position now?
Matthews:
I think the position has not changed. The information necessary to achieve those things will still flow through, through the reporting arrangements outlined in this package.
Senator Cook:
It then comes back to the question: how could you have got it so terribly wrong that the information, according to the Treasurer's press release, will flow now annually, not quarterly, yet you have imposed on small business the compliance burden of two sets of remittances under the old form?
Matthews:
As I say, the question of the design of the report relates to where the information resides, whether it resides in taxpayer records, the timing of those and as to when and if it is reported. The information is still within the system, whether it has been reported to us or not, and will continue to flow through these new arrangements.
Penalties for under-estimating
Businesses choosing the new, simplified method of remittance should also be aware that while they are able to simply remit to the ATO the amount notified on the BAS, if they choose to vary this amount they may be liable for a penalty if they under-estimate.
The ATO has confirmed that the general interest charge (GIC) will apply to businesses that choose to vary the amount pre-printed on the BAS, and underestimate by 15% or more.
"Variations are made by estimating annual GST and then paying an adjusted instalment each quarter," an ATO spokesperson says.
"By the end of the first quarter, 25% of the estimated annual amount is paid, by the second quarter 50%, by the third quarter 75% and by the fourth quarter 100%.
"The estimate needs to be at least 85% of the actual GST payable for the year to avoid the general interest charge."
If the business pays the amounts pre-printed on the BAS and at year's end discover GST payable is higher, they must pay the higher amount, but no penalty is incurred.
"If at the annual return your instalments have been greater than the annual return showed, you will get that back, if they are less you will make up the difference, a bit like income tax," Treasurer Peter Costello said when releasing details of the changes last week.
"If they have under-paid they have to pay a bit more in the next year, if they have over-paid they have to pay a bit less in the next year."
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