Common BAS Mistakes: How to Correct Errors, Avoid Penalties, and Understand BAS Refunds vs. Payable

 

Estimated reading time: 12 minutes

 

Key Takeaways

 

• • Common BAS mistakes can lead to significant penalties and audits by the ATO.

 

• • Errors often occur with incorrect GST amounts, misuse of tax codes, lodging BAS late, and omitting PAYG withholding.

 

• • Correcting BAS errors promptly helps avoid penalties and interest charges.

 

• • Understanding the difference between BAS refunds and payable amounts is vital for cash flow management.

 

• Utilizing professional help and accurate record-keeping reduces the risk of mistakes and audits.

 

 

Introduction: Understanding Common BAS Mistakes

 

The Business Activity Statement (BAS) is a compulsory form that most Australian businesses must lodge with the Australian Taxation Office (ATO). It is used to report a range of tax obligations including GST (Goods and Services Tax), PAYG (Pay As You Go) withholding, and sometimes other taxes.

 

Accurate and on-time BAS submissions are critical. Mistakes may lead to:

 

• Heavy penalties
• Scrutiny by the ATO
• Cash flow issues
• Missed tax credits

 

In this article, we will explore the common BAS mistakes businesses make, learn how to correct BAS errors, understand the consequences like penalties for late BAS lodgment, and distinguish between a BAS refund vs BAS payable. You’ll gain practical guidance to get BAS right every time.

 

1. Common BAS Mistakes That Hurt Your Business

 

Why Errors in BAS Submissions Are Risky

 

Even small BAS mistakes can disrupt your operations. They may:

 

• Delay tax refunds
• Trigger an ATO audit
• Lead to unnecessary penalties and interest charges
• Impact business cash flow and credibility

 

Let’s break down the most frequent common BAS mistakes.

 

Lodging BAS Late

 

• Missing BAS deadlines is a frequent error.
• It attracts late lodgement penalties, starting from $313 and increasing over time.
• Interest can also apply to unpaid tax amounts.
• Repeated lateness increases ATO scrutiny.

 

Incorrect GST Amounts

 

• Failing to charge GST on taxable sales.
• Claiming GST credits on purchases with no GST.
• Data entry mistakes lead to inaccurate totals.

 

Examples:

 

• Claiming GST on expenses for food (usually GST-free).
• Using outdated or misconfigured accounting tax codes.

 

Claiming Ineligible Deductions

 

• Some expenses are non-deductible under ATO rules (e.g., penalties, private expenses).
• Including them can result in penalties or repayments after an audit.

 

Misuse of Tax Codes

 

• Using the wrong tax codes in accounting software leads to inaccurate GST reporting.

 

Examples:

 

• Classifying lease payments as fully GST-inclusive.
• Accidentally claiming GST on private expenses.

 

Omitting PAYG Withholding

 

• Businesses forget to report PAYG for employee wages.
• This leads to interest and penalties by the ATO.

 

2. How to Correct BAS Errors in Your Reports

 

Fixing mistakes early helps keep your business compliant. Here’s how to correct BAS errors effectively.

 

Step 1: Identify the Error

 

• Reconcile your business accounts with your BAS lodgments.
• Check for misclaimed GST, missing expenses, or omitted payroll (PAYG).

 

Step 2: Fix Mistakes Within ATO Guidelines

 

Credit and Debit Mistakes:

 

• Credit error = You overstated what you owe – you can generally fix it in your next BAS.
• Debit error = You understated what you owe – report the correction ASAP.

 

More info: ATO Guidelines on Fixing BAS Mistakes

 

How to Correct a Submitted BAS Form

 

1. Log in to the ATO Business Portal or your accounting software.
2. Find the submitted BAS you need to adjust.
3. Clearly explain the error and enter new figures.
4. Submit the corrected BAS and keep documentation for your records.

 

Future Error Prevention Tips

 

• Reconcile accounts monthly.
• Review GST codes and taxable transactions regularly.
• Get help from a registered BAS agent or accountant for complex entries.

 

3. Penalties for Late BAS Lodgment

 

What Happens When You Lodge BAS Late?

 

Submitting BAS past the due date can be costly:

 

• Penalties start at $313
• The longer the delay, the more the fine increases
• General interest charges (GIC) apply to outstanding amounts
• The ATO may flag your business as high-risk

 

How Penalties Escalate

 

Days Late	Penalty Units	Current Penalty Amount (per unit: $313)
1–28	1	$313
29–56	2	$626
57–84	3	$939
85–112	4	$1,252
Over 112	5	$1,565

 

Avoiding Late Lodgment Penalties

 

• Set calendar reminders for due dates.
• Enable automation in software like Xero or MYOB.
• Work with a BAS agent or accountant to ensure timely submissions.

 

4. How to Fix Incorrect GST on BAS

 

Common GST Reporting Errors

 

GST is often where most BAS mistakes happen. Watch for:

 

• Claiming GST on items not subject to GST (e.g., bank fees, wages).
• Double-claiming GST on hire-purchases.
• Using invalid tax codes in your accounting software.

 

How to Fix Incorrect GST on BAS

 

Step-by-step correction:

 

1. Review source invoices – Was GST properly included?
2. Recode wrongly classified transactions using correct GST tax codes.
3. Amend the original BAS via the ATO portal or your software.
4. Explain the correction clearly when you lodge the amendment.

 

Official ATO guide: Fixing BAS Mistakes or Making Adjustments

 

Best Practices for Future Accuracy

 

• Train team members on GST categories.
• Conduct internal BAS audits every quarter.
• Use a professional to set up the chart of accounts in your accounting system.

 

5. ATO Audit for Incorrect BAS: What Triggers It?

 

What Is an ATO Audit?

 

An ATO audit is a review of your business taxes. It can be triggered if the ATO suspects errors or inconsistencies.

 

Common Audit Triggers

 

• Recurring late lodgments
• Consistently wrong GST numbers
• Huge adjustments without proper documentation
• Your BAS doesn’t match other reports filed with the ATO

 

What Happens During an Audit?

 

• The ATO may ask for:
  • Invoices
  • Receipts
  • Timesheets
  • Payroll summaries
• You must explain all discrepancies and show how you corrected past BAS errors.

 

Preparation Tips

 

• Keep detailed evidence of GST claims and payroll declarations.
• Regularly reconcile your BAS with internal books.
• Get legal or tax support early if notified of an audit.

 

6. BAS Refund vs BAS Payable: What Does It Mean For You?

 

What Is a BAS Refund?

 

• Happens when GST paid on purchases (input tax credits) is greater than the GST collected on sales.
• The ATO gives you the difference back.

 

What Is a BAS Payable?

 

• If you collect more GST on sales than you’ve spent on purchases, you owe the net amount to the ATO.

 

Term	Meaning	Cash Flow Impact
BAS Refund	Input tax credits > GST on sales = ATO pays you	Positive—more cash for the business
BAS Payable	GST on sales > input tax credits = you pay ATO	Negative—requires managing cash

 

How to Calculate the Difference

 

1. Total up GST on Income (Sales)
2. Total up GST on Expenses (Purchases)
3. Subtract: Income GST – Expense GST

 

Managing Refunds and Payables

 

• BAS Refund: Verify all GST credits are legitimate before claiming.
• BAS Payable: Budget monthly so the payment doesn’t strain your business.

 

Conclusion

 

BAS reporting is essential for your business, but it’s easy to slip up. Let’s recap the key points:

 

Recap of Common BAS Mistakes

 

• Lodging BAS late
• Misreporting GST amounts
• Using incorrect tax codes
• Ignoring PAYG obligations
• Claiming ineligible deductions

 

Each of these common BAS mistakes increases audit risk and costs money.

 

Importance of Accuracy and Timeliness

 

Staying compliant with BAS isn’t just about avoiding penalties—it’s about:

 

• Protecting your business from audits
• Improving cash flow
• Gaining back precious time and resources

 

Use the Strategies in This Guide

 

• Reconcile your books regularly
• Fix mistakes quickly according to the ATO
• Understand the BAS refund vs BAS payable difference
• Use the correct tax codes and stay across ATO updates

 

Call-to-Action

 

Don’t go it alone. If you’re not sure how to handle your BAS:

 

• Use accounting platforms like Xero, MYOB, or QuickBooks
• Hire a professional BAS agent or accountant
• Visit the ATO website for reliable BAS instructions

 

Additional Resources

 

• • ATO Guidelines: Fixing BAS Mistakes or Making Adjustments

 

• • Common Mistakes and Fixes:
    • Common Mistakes When Lodging BAS Filings
    • 10 Common GST Mistakes in BAS Reports
    • YouTube: Common GST Mistakes
    • Stripe: Common GST Mistakes in Australia

 

• • BAS and GST Software Tools:
    • Xero
    • MYOB
    • QuickBooks

 

• Find a BAS Agent:
  • TPB Registered BAS Agent Search