The Australian Taxation Office updated guidance on voluntary and compulsory monthly goods and services tax reporting, retaining authority to direct businesses to monthly cycles if they meet turnover thresholds, operate for less than three months, or have compliance failures, with objections permitted within 60 days and a 12-month minimum reporting period for mandatory changes.Â
The Australian Taxation Office (ATO) has updated its guidance on changing to monthly GST reporting, including new guidance on voluntarily switching GST reporting. It has also revised its guidance on when it may change a business’s GST reporting cycle, including circumstances in which businesses may be moved from quarterly to monthly reporting.
Why the ATO may change a business’s GST reporting cycle
Why the ATO can change GST reporting
The ATO will direct a business to move to monthly GST reporting if it has determined that any of the following apply:
- The business meets the tax period turnover threshold.
- The business will be operating in Australia for less than 3 months.
- The business has a history of failing to comply with tax obligations.
Examples of failing to comply with tax obligations include:
- lodging or paying late
- failing to lodge or pay
- reporting tax obligations incorrectly.
The ATO will notify the business in writing if it moves the business to monthly GST reporting. The business will then need to calculate, report and pay GST on a monthly basis on the BAS.
Effect on other reporting obligations
If a business has wine equalisation tax (WET), luxury car tax (LCT) or fuel tax credit obligations, these amounts will also need to be reported each month in the BAS. This change occurs automatically as part of changing the GST reporting cycle.
A business can choose to align other reporting and payment obligations, for example pay as you go (PAYG) withholding.
If there is a disagreement with the change
If a business disagrees with the change, an objection can be lodged within 60 days from the date of notification of the ATO’s decision.
Lodge and pay on time
Businesses must lodge and pay the BAS in full and on time to avoid a failure to lodge on time penalty and general interest charge.
If there is concern about meeting the due date, before the due date the business should either:
- contact a registered tax professional
- find out about the support options available.
Requesting a change to the GST reporting cycle
If a determination is made, the business must report GST monthly for a minimum of 12 months. To revert to quarterly or annual reporting, a request must be made for the determination to be revoked.
A request for revocation can be made by contacting a registered tax agent or contacting the ATO directly. The ATO will only approve requests if satisfied that the grounds for the determination no longer apply. For more information, see Why the ATO can change a business’s GST reporting cycle.
Example: Change to monthly reporting
Jack has been running a small business for over 5 years and his turnover ranged from AUD 350,000 to AUD 550,000 per year. He uses a digital accounting software package for BAS preparation. His tax agent has set it up for quarterly GST reporting.
With the demands of running a busy business, Jack has developed a pattern of lodging and paying late. Over the past 18 months, Jack has fallen behind and stopped engaging with the ATO. At this point:
- he hasn’t lodged a number of past BAS
- some of his previous BAS were lodged late
- his last business income tax return has not been lodged
- he has an overdue tax debt
- he has defaulted on the payment plans he had set up to pay the overdue tax debt.
Jack receives a letter from the ATO advising him that he will now have to report and pay his GST monthly. He understands from the letter that this decision is based on his history of failing to comply with his tax obligations.
Jack decides to bring his lodgments up to date and enters into a new payment plan for the overdue debt.
This marks a turning point in his business. Jack finds it easier to stay on track with accurate, up-to-date record-keeping, which helps him make better business decisions. After the 12-month period, Jack saw the benefits of monthly reporting and decided to keep his reporting cycle as monthly.
Voluntarily changing your GST reporting
Advantages of monthly GST reporting
Moving to monthly reporting could help businesses manage their operations and cashflow.
Many businesses that have voluntarily moved to monthly GST reporting have found that it aligns better with other business obligations that occur monthly, and that smaller, more manageable payments help them understand their transaction history and how much GST to pay or put aside.
Effect on related BAS reporting obligations
This change will impact related obligations on the BAS, such as wine equalisation tax (WET), luxury car tax (LCT) and fuel tax credits. This will occur automatically as part of changing the GST reporting cycle.
Businesses can choose to align other reporting and payment obligations to monthly — for example, pay as you go (PAYG) withholding.
How to change to monthly GST reporting
Businesses can voluntarily change to monthly GST reporting in Online services for business by accessing the Profile menu and selecting Tax registration.
Tax and BAS agents can also make the change in Online services for agents.
Sole traders will need to phone the ATO or apply in writing.
If a change to monthly reporting is made, it will take effect from the start of the next quarter.
For more information, see Changing your reporting and payment cycle.
Lodge and pay on time
Businesses must lodge and pay their BAS in full and on time to avoid a failure to lodge on time penalty and general interest charge.
If there are concerns about being unable to lodge and pay by the due date, businesses should — before the due date — contact a registered tax professional or find out about the support options available.
