Suitable for: Sole traders who need to lodge BAS and income tax returns
Tax difficulty: Moderate
Time to read: 3-5 Minutes
If you lodge Business Activity Statements (BAS) throughout the year, you might find it frustrating that you need to report all of your business income and expense information again on your income tax return. All this duplicated work can cause headaches and delays when you’re preparing your annual tax return. That’s why the team at Airtax has designed a ‘BAS to income tax return’ migration function. Read on to find out more about how Airtax can save you time and hassle with this unique feature.
Why BAS to Income Tax Return?
As a sole trader, a key component of your income tax return is the sole trader section where you record your business income and expense information to determine your overall net business position. Does this task sound familiar to you? It’s probably because you essentially do the exact same thing each month or quarter when you lodge your BAS. Wouldn’t it be great if you could focus on getting this information right only once, instead of needing to prepare the same information again for your annual income tax return? Absolutely!
How does it work?
Put simply, the BAS to income tax return migration function collates all of your BAS that you have submitted through Airtax during the financial year, and pre-populates the sole trader section of your Airtax tax return with the necessary income and expense data. The function is not able to prefill information from BAS that you have not submitted through Airtax, so keep this in mind if you would like to make the most of this feature.
Note: If you have completed some BAS during the financial year with a platform other than Airtax, you will need to add to your Airtax prefilled amounts. You have a couple of options in this scenario:
- Use the below information to calculate the amounts that you need to manually input from your non-Airtax BAS.
- Book in a phone call to speak with a PwC accountant, and request your BAS details from your previous BAS lodgement provider. We will then help you resolve this over the phone.
If you want to take a look under the hood of our BAS to income tax return migration calculations, check out the below information which discusses exactly how we compute your income and expense information.
Before we get started, let’s have a quick refresh on what “gross business income” means. Gross business income is your total business revenues for the financial year before fees and charges are deducted. As a result, your gross business income may be different from the net income you actually receive in your bank account. Given you are required to report gross business income for tax return purposes also, we can simply total up your BAS income data and use this information to complete your income tax return.
For tax return purposes, we will first sum up any income amounts recorded in each BAS period, for example, Uber income, Square income, and any Other Income amounts. We then need to remove GST amounts from this result, as they are not relevant to the income tax return as a GST-registered sole trader. We do this through the below calculation:
GST-exclusive gross business income = total gross business income / 1.1
We will prefill this result to the ‘Gross Business Income’ field of the sole trader section.
Because you can have different business use percentages for your expenses across all of your BAS submissions in a given year, we need to perform some calculations before pre-filling these amounts to your income tax return. For each BAS period, the following calculation is performed for each of your expenses:
$ amount x Business Use Percentage
This allows us to strip out the personal use component of your expenses, which is not claimable on your income tax return. The migration function will do this calculation for each expense in each BAS period, and then sum-up the results to work out what your total business deduction for each category was across the entire financial year. We’ll call this the “total business expense”.
Finally, as we did for income, we need to remove GST from this total amount which is done using the below calculation:
Total business expense / 1.1
The resulting expense amount is then mapped to its relevant field on the sole trading section of the tax return. In some cases, we need to group a number of BAS expenses and input them in a general or “other” field. In these situations, don’t worry, we still perform the same calculations above to each BAS expense before grouping them together.
Note: if you have car expenses to be prefilled, you will notice that the business use percentage will be prefilled for you as 100%, even though you may have used a % on your BAS that is less than 100. This is very important because our prefill function has already stripped out your personal use portion before pre-filling your car expense values (as described above). If we were to record less than 100% on the sole trader section again, we would be removing personal use twice which will result in underclaiming. Please do not adjust this percentage if/when you see it on your income tax return.
If you still have any questions about the Airtax BAS to income tax return migration function, or if you would like to know more about ways you can optimise your tax position, you can schedule a time to speak with one of our PwC accountants. Check out our phone support services below to find out more:
- Tax Assist: if you have particular questions about the sole trader section of your return, including migrating your BAS into your tax return, this 30-minute phone call might suit you. $179 includes a 30-minute phone call and one free income tax return lodgement.
- Tax Professional: our most comprehensive income tax return support service. If you need a detailed walkthrough of an entire tax return with a dedicated accountant, from start to finish, including migrating your BAS into your tax return, Tax Professional is perfect for you. $349 gets you maximal support, including a follow-up phone call where necessary, and includes a free income tax return.
Feedback from our users suggests that Airtax phone support is a great way to get peace of mind knowing that you’re lodging correctly as a sole trader, and can help you find any deductions you may not have known you could claim.
What you’ve learned:
- Why migrating your BAS data to your income tax return makes lodging your tax return simpler
- What “gross business income” means
- How and why Airtax removes GST from your BAS income and expense data, to produce “GST-exclusive” amounts
- How the Airtax BAS to income tax return migration works
- Why your car expenses business use percentage will always be prefilled as 100%