Solutions 38 Chapter 5: BAS & IAS INSTALMENT ACTIVITY STATEMENTS (IAS) What is an Instalment Activity Statement? Individual taxpayers, trustees with business income, and businesses not registered for GST use the Instalment Activity Statement (IAS) to report and pay their obligations and entitlements relating to: Pay As You Go (PAYG) amounts withheld from payments to others. PAYG instalments. Fringe Benefits Tax (FBT) instalments. An IAS is a single form you complete and return to the ATO to report these obligations and entitlements. The IAS replaced a wide range of forms which businesses and certain people not in business had to complete to report their tax obligations and entitlements to the ATO before the introduction of The New Tax System on 1 July 2000. However, taxpayers will still need to lodge an annual income tax return and an annual fringe benefits tax return, if applicable. Who should use an Instalment Activity Statement? All businesses and individuals with any of the above-listed tax obligations and entitlements must complete an IAS at the end of each reporting period. The IAS mainly applies to individuals with investment income such as rental income, dividends and/or interest, or to businesses with an annual turnover below the minimum $75,000 GST registration threshold. It is very important to recognise that the Instalment Activity Statement and Business Activity Statement are separate forms. The Instalment Activity Statement (IAS) is for those taxpayers who are not registered for the goods and services tax (GST), whereas the Business Activity Statement (BAS) is for taxpayers who are registered for GST. Also, if you have wine equalisation tax (WET) or luxury car tax (LCT) obligations you need to register for GST. Therefore, the ATO will then send you a Business Activity Statement (BAS) instead of an Instalment Activity Statement.
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Chapter 5:
BAS & IAS
INSTALMENT ACTIVITY STATEMENTS (IAS)
What is an Instalment Activity Statement? Individual taxpayers, trustees with business income, and businesses not registered for GST use the Instalment Activity Statement (IAS) to report and pay their obligations and entitlements relating to:
Pay As You Go (PAYG) amounts withheld from payments to others. PAYG instalments. Fringe Benefits Tax (FBT) instalments.
An IAS is a single form you complete and return to the ATO to report these obligations and entitlements. The IAS replaced a wide range of forms which businesses and certain people not in business had to complete to report their tax obligations and entitlements to the ATO before the introduction of The New Tax System on 1 July 2000. However, taxpayers will still need to lodge an annual income tax return and an annual fringe benefits tax return, if applicable.
Who should use an Instalment Activity Statement? All businesses and individuals with any of the above-listed tax obligations and entitlements must complete an IAS at the end of each reporting period. The IAS mainly applies to individuals with investment income such as rental income, dividends and/or interest, or to businesses with an annual turnover below the minimum $75,000 GST registration threshold. It is very important to recognise that the Instalment Activity Statement and Business Activity Statement are separate forms. The Instalment Activity Statement (IAS) is for those taxpayers who are not registered for the goods and services tax (GST), whereas the Business Activity Statement (BAS) is for taxpayers who are registered for GST. Also, if you have wine equalisation tax (WET) or luxury car tax (LCT) obligations you need to register for GST. Therefore, the ATO will then send you a Business Activity Statement (BAS) instead of an Instalment Activity Statement.
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Types of Instalment Activity Statement There are four types of IAS. These are:
IAS N - This document is for taxpayers who have elected to report and pay an annual PAYG income tax instalment.
IAS I - This document is for taxpayers with a PAYG tax withheld only (quarterly or monthly).
IAS B - This document is for taxpayers with a PAYG income tax instalment obligation only. Typical users include partners in partnerships and other individual taxpayers who report and pay PAYG income tax instalments quarterly.
IAS J - This document is for taxpayers with PAYG income tax instalment, PAYG tax withheld and FBT obligations. Use this document for your record keeping purposes.
How do you receive your Instalment Activity Statement? The ATO sends the IAS to taxpayers before they need to lodge it. The statement is personalised, with some parts already completed to save the taxpayer time and effort. Each activity statement has a unique document identification number, which is shown on the front of your IAS. The document ID is used by ATO systems to identify your activity statement during processing.
How often do you lodge your Instalment Activity Statement? The ATO will pre-print information on your IAS to show when you have to lodge and the period covered by the activity statement for each of your obligations. Businesses and individuals not registered for GST with any of PAYG instalment, PAYG withholdings of FBT obligations and entitlements need to complete an IAS either monthly, quarterly or annually. The following tables provide a general summary of how often you need to lodge your IAS: PAYG withholding amounts
Annual PAYG withholdings
Remittance due Report required to accompany payment
SMALL
Up to $25,000.
Quarterly: On or before the 21st of the month following the period end.
IAS quarterly.
MEDIUM
$25,000 up to $1m.
Monthly: On or before the 21st of the month following the period end.
IAS monthly.
LARGE
Over $1m.
Monthly: On or before the 21st of the month following the period end.
Payments and IAS must be lodged electronically.
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PAYG instalments
Annual PAYG instalments
Remittance due Report required to accompany payment
Individuals with notional tax of less than $8,000.
Quarterly: On or before the 28th of the month following the period end. i.e. 28 October, 28 February, 28 April and 28 July
IAS quarterly.
Individuals deriving primary production income or “special professional income”.
Quarterly: as above
IAS quarterly.
All other entities not using annual instalment.
Quarterly: as above
IAS quarterly.
FBT instalments FBT instalment. Quarterly:
On or before the 28th of the month following the period end. i.e. 28 October, 28 February, 28 April and 28 July
IAS quarterly.
When do you lodge your Instalment Activity Statement? You need to lodge your completed IAS by the date shown in the top right-hand corner of the front of your activity statement. Make sure you allow enough time for your activity statement and any payment to reach the ATO by the due date.
How do you lodge your Instalment Activity Statement? You can lodge your activity statement online via the Internet using the ATO's Business Portal or electronic commerce interface (ECI). These are both fast, convenient and secure ways to lodge your IAS. Registered tax agents and registered BAS service providers can help you prepare and lodge your activity statement. Most tax agents/BAS service providers can lodge your activity statement electronically via the electronic lodgment service (ELS). By telephone if you have nothing to report at any label on the IAS. The ATO’s telephone service accepts lodgments for activity statements that are up to six months overdue. Otherwise, you can mail your correctly completed IAS to the ATO using the pre-addressed envelope provided.
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When mailing your IAS, you must use the official form provided by the ATO. Many commercial accounting software products can produce a document very similar in appearance to the official activity statement. While this document is fine for purposes such as record keeping, it must not be mailed to the ATO as a substitute for the official form.
How do you work out how much you owe or are owed by the ATO?
In completing your IAS you work out a net amount which you either owe to the ATO or which the ATO owes you. These instructions will help you work out this amount correctly.
What amounts do you show on your Instalment Activity Statement?
When filling in your IAS show all amounts in Australian currency. For each amount to be shown on your activity statement, show only the whole dollar amount. Do not show the cents. For example, show $7,643.69 as $7,643. Do not write a minus sign (–) to show a negative amount on your activity statement.
How to pay
Mail your correctly completed IAS to the ATO and attach a cheque for any required payment.
The ATO also offers a range of convenient payment options, both in Australia and overseas.
These are:
BPAY® credit card (conditions apply) direct credit direct debit mail at Australia Post outlets from overseas – pay by BPAY®, direct credit or mail.
If you make a payment at Australia Post, or you pay electronically, you need to still send your completed IAS to the ATO either by mail or electronically.
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What is the penalty if I lodge my activity statement late? The penalty for lodging the activity statement late is one penalty unit ($110) for each 28 day period, or part of a period, that the activity statement is outstanding, up to a maximum of 5 penalty units ($550). For a business with an annual turnover between $1 million but less than $20 million, the penalty is multiplied by two. For a large business with an annual turnover of $20 million or more, the penalty is multiplied by five resulting in a maximum penalty of $2,750. The Commissioner also has the discretion to remit this penalty. The circumstances of a business, such as the amount of tax payable, the past record of paying tax and lodging tax forms, and the effort made by the business in trying to meet its tax obligations, will affect whether penalties are remitted and the extent of the remission.
What is the penalty if my activity statement is incorrect? If you make an honest mistake which results in a shortfall in the amount of tax properly payable, the ATO will only require that you adjust the activity statement to pay the correct amount plus a general interest charge. If the activity statement is incorrect because you made a false or misleading statement and this results in a shortfall in the tax paid, in addition to being required to pay the shortfall plus a general interest charge, you may be liable for a penalty. The amount of the penalty will vary depending on the cause of the shortfall amount.
The base penalty amount, which can be increased or decreased depending on whether there are aggravating or mitigating factors, is a percentage of the tax shortfall amount as follows:
25% where the mistake is caused by you not taking reasonable care.
50% where the mistake is caused by you being reckless, and,
75% where the mistake is caused by you intentionally disregarding the law. However, you will still have to pay interest on any understated tax or over-claimed credit.
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1. Reporting periods are either every one month or three months. An entity has a choice in relation to a monthly or three monthly tax period, however, monthly tax periods can be compulsory in some circumstances. If the entity’s annual turnover is below $20 million the entity’s tax periods will be generally for 3 months ending on 31 March, 30 June, 30 September and 31 December. However, an entity may elect to have one month tax periods.
2. Monthly tax periods are compulsory if:
The entity’s tax period turnover threshold is $20 million or more.
The entity has a history of not complying with taxation obligations.
The entity has a substituted accounting period for income tax.
The entity will be carrying on an enterprise in Australia for less than three months.
3.
Adjustment events.
Bad debts.
A change in the extent of the creditable purpose.
4. Examples of where adjustment events arise includes:
All or part of a supply or acquisition is cancelled (eg. goods are returned due to poor quality).
The consideration for a supply or acquisition is altered (eg. a volume discount is given).
A supply becomes, or stops being taxable.
An acquisition becomes, or stops being creditable.
A staff member makes an error calculating the GST liability or input credit.
5. GST tax periods:
A monthly period
A quarterly period An annual period may be used by entities with annual turnover of $2,000,000 or less that elect to pay the GST by instalments. There is limited choice as to which periods you may pay the GST. If monthly tax periods are not compulsory an entity may choose a quarterly period.