8 BAS Mistakes That Cost Australian Small Businesses Money (And How to Avoid Them)

For most Australian small business owners, BAS lodgement is one of those tasks that sits in the background. A regular obligation that just needs to get done.  But done incorrectly, your BAS can create problems that take months to untangle. Incorrect GST figures. Penalties for late lodgements. Credits you were entitled to but never claimed. And in some cases, ATO scrutiny that could have been avoided entirely. 

The good news is that most BAS mistakes are preventable. Here are the seven most common ones — and what accurate bookkeeping looks like instead. 

Mistake 1: Using a Bookkeeper to do a BAS Agent’s Job 

The ATO has very stringent rules around who is allowed to advise you in matters relating to GST and payroll.  A bookkeeper is not allowed to deal with any account affected by GST or payroll.  The ATO requires a Registered BAS Agent to deal with these matters on your behalf.  A Registered BAS Agent is licensed by the Tax Practitioner’s Board and must maintain certain professional standards to ensure that they are fit and proper representatives on your behalf with the ATO. 

What to do instead: Ask for the BAS Agent number of your bookkeeper to ensure that they are a Registered BAS Agent and held to the professional standards necessary to do the work. 

Mistake 2: Lodging Late (or Not at All) 

This is the most straightforward mistake and one of the most damaging.  

BAS is due quarterly for most small businesses (monthly for some). Miss the deadline and the ATO applies a failure-to-lodge penalty. Starting at $330 and increasing based on how long the lodgement is overdue and the size of your business.    

The thing many business owners do not realise: you can lodge a BAS even if you cannot pay the full amount owing. Lodging on time and paying later is significantly better than not lodging at all, because late lodgement penalties add on top of any unpaid tax.  

What to do instead: Set BAS due dates as hard calendar reminders, not just for lodgement but for the bookkeeping preparation that needs to happen two to three weeks before. 

Mistake 3: Mixing Up GST-Free and Taxable Items 

Not every purchase and sale attracts GST. Fresh food, some medical services, certain educational expenses, and exports are GST-free. Meaning no GST is included and none can be claimed. 

When transactions are coded incorrectly in your accounting software, claiming GST credits on GST-free purchases, or not reporting GST on taxable sales, your BAS figures are wrong. This can result in either overpaying or underpaying, and either way creates a reconciliation problem down the line. 

What to do instead: Make sure your bookkeeper or accounting software is correctly coding transactions as GST-applicable (1/11th of the price), GST-free, or input-taxed. A regular review of your chart of accounts coding reduces the risk of systematic errors building up. 

Mistake 4: Including Personal Expenses in Business Accounts 

When business and personal spending are mixed using the business card for personal purchases or running personal expenses through the business account the bookkeeping becomes tangled. 

Personal expenses cannot be claimed as business deductions and should not affect your GST calculations. But when they are sitting in the same account with no separation, they often get coded incorrectly sometimes generating false GST credits or inflating deductible expenses. 

What to do instead: Keep business and personal accounts strictly separate. If you have already been mixing them, a bookkeeper can go back through and correctly reclassify transactions — but it takes time and costs more than prevention would have. 

Mistake 5: Getting PAYG Withholding Wrong 

If you have employees, PAYG withholding is reported on your BAS. This is the tax you withhold from employee wages and remit to the ATO. 

Common PAYG mistakes include: 

• Withholding the wrong amount because tax tables have not been updated 

• Forgetting to include contractors who should be treated as employees under the ATO's rules 

• Not remitting PAYG on time, which triggers interest 

• Reporting PAYG incorrectly on BAS because payroll records do not match 

What to do instead: Make sure your payroll and bookkeeping systems are connected. PAYG amounts should flow directly from your payroll records into your BAS preparation — not be estimated or calculated separately. 

Mistake 6: Claiming GST Credits You Are Not Entitled To 

Input tax credits (the GST you claim back on business purchases) are one of the most commonly mishandled parts of BAS. 

Some purchases simply do not carry a GST credit entitlement: 

• Private or personal use items 

• Purchases from suppliers who are not registered for GST 

• Some financial services and insurance products 

• Purchases where you do not hold a valid tax invoice 

Overclaiming input tax credits is not just a bookkeeping error — it is something the ATO can treat seriously, particularly if it appears to be a pattern. 

What to do instead: Only claim GST credits against valid tax invoices from GST-registered suppliers. Your bookkeeper should be checking supplier GST registration status and making sure invoices meet ATO requirements before credits are claimed. 

Mistake 7: Not Reconciling Before Lodging 

Many business owners prepare and lodge BAS directly from their accounting software without first reconciling their bank accounts. 

The problem: if your bank accounts are not reconciled, transactions may be missing, duplicated, or incorrectly dated. This means the GST figures you report on your BAS may not reflect what actually happened in your business during that period. 

Lodging an inaccurate BAS creates more work. You may need to lodge an amendment, which takes time and draws ATO attention. 

What to do instead: Bank reconciliation should be completed and checked before every BAS is prepared. This is a non-negotiable step, not an optional extra. 

Mistake 8: Falling Behind and Then Rushing to Catch Up 

When bookkeeping has been neglected for a quarter (or longer), there is a temptation to rush through catch-up work to meet the BAS deadline. 

Rushed bookkeeping produces inaccurate BAS figures. And inaccurate BAS figures create a cycle: amendments, reconciliation issues, wrong payments, more corrections. Each mistake adds time, cost, and ATO attention. 

What to do instead: If your bookkeeping is behind, it is better to lodge an extension request with the ATO (where available) or engage a registered BAS agent to help you catch up properly rather than lodge incorrect figures under pressure. 

Why BAS Accuracy Matters Beyond the Lodgement Itself 

BAS is not just a compliance task. The figures you report each quarter are the foundation of your business's relationship with the ATO. 

Consistent, accurate BAS lodgements demonstrate that your business is managing its obligations properly. Inconsistent or incorrect lodgements even when they are honest mistakes can trigger ATO reviews, debt accumulation through under-reporting, and a pattern that is much harder to recover from. 

For businesses that are already carrying ATO tax debt, accurate BAS lodgements are even more important. They show the ATO that you are engaging seriously with your obligations, which matters when you are negotiating a payment plan or seeking penalty remissions. 

Getting BAS Right From the Start 

Most BAS mistakes do not happen because business owners are careless. They happen because bookkeeping has fallen behind, records are not in order, or the business has grown faster than the financial systems supporting it. 

The fix is not complicated. It is consistent, accurate bookkeeping done regularly, reviewed carefully, and prepared properly before every BAS deadline. 

At Bookkeeping On Time, we prepare BAS information for Australian small businesses as part of our regular bookkeeping service. We reconcile your accounts, code transactions correctly, track GST and PAYG, and make sure your figures are accurate before anything is lodged. 

If you want to feel confident about your next BAS and stop worrying about what might be wrong get in touch with us today. 

Contact Bookkeeping On Time

Frequently Asked Questions About ATO Tax Debt 

What happens if I lodge my BAS late?

The ATO applies a failure-to-lodge (FTL) penalty for overdue BAS. The base penalty is one penalty unit ($330 as of 2025) for each 28-day period the lodgement is overdue, up to a maximum of five penalty units ($1,650) for small businesses. Larger businesses face higher penalties. Importantly, lodging late is always better than not lodging. The ATO can also consider remitting penalties in some circumstances where there is a reasonable excuse.

What is the difference between GST-free and input-taxed supplies?

GST-free supplies (like fresh food and most exports) do not include GST, but the supplier can still claim input tax credits on related purchases. Input-taxed supplies (like residential rent and most financial services) also do not include GST, but the supplier cannot claim input tax credits on related purchases. The distinction matters for how purchases are coded in your bookkeeping and what you can claim on BAS. 

Do I need a tax invoice to claim a GST credit? 

Yes. For purchases over $82.50 (including GST), you must hold a valid tax invoice from a GST-registered supplier to claim the input tax credit. A valid tax invoice must include the supplier's ABN, a description of the goods or services, the GST amount or a statement that GST is included, and the date. Claiming credits without valid invoices is a common BAS audit trigger. 

How do I check if a supplier is registered for GST?

You can check any ABN on the Australian Business Register at abr.business.gov.au. If a supplier is not registered for GST, no GST is included in their invoice and no credit can be claimed, regardless of what the invoice says. 

Can I amend a BAS after it has been lodged?

Yes. You can lodge a BAS amendment if you discover an error after lodgement. Amendments can be lodged through the ATO's online services or through your registered BAS agent. If the error resulted in underpayment, interest may apply on the difference. If you overpaid, you may be entitled to a refund.

How often do I need to lodge BAS?

Most small businesses lodge quarterly. Businesses with a GST turnover of $20 million or more must lodge monthly. You can also choose to lodge monthly voluntarily. The ATO notifies you of your lodgement frequency when you register for GST, and this can be changed by contacting the ATO if your circumstances change. 

What is the difference between a BAS and an IAS?

A Business Activity Statement (BAS) is lodged by businesses registered for GST and includes GST, PAYG withholding, and sometimes PAYG instalments. An Instalment Activity Statement (IAS) is lodged by businesses not registered for GST but who have PAYG withholding or instalment obligations. If you are registered for GST, you will lodge BAS rather than IAS. 

Bookkeeping On Time is a bookkeeping service supporting Australian small businesses with accurate records, BAS preparation, GST and PAYG tracking, and catch-up bookkeeping. We work alongside your accountant to make sure your numbers are always ready.