Fallen behind on GST and BAS? What a tradie can do

BAS time has a way of arriving faster than the money does. You quoted GST-inclusive, you banked the GST-inclusive payment, and somewhere between the bank balance and the due date it turned into fuel, materials and a very overdue apprentice wage. This page is about what to do when the statement is due and the cash is not there.

Why does GST debt build up so easily in a trade business?

GST is not your money. When you are registered, every payment you collect includes an amount that belongs to the ATO, and you report and pay it through your business activity statement. The ATO describes the BAS as the way to report and pay GST, PAYG instalments, PAYG withholding and other taxes.

In practice, the bank account does not know the difference. A single balance holds the profit, the wages money and the GST together, and in a lean fortnight the pressure to spend it is real.

Typical trade-specific causes:

• A big progress claim paid late, with GST owed on the invoice before the cash arrives.
• Materials bought on trade accounts, which leaves less buffer than the books suggest.
• Seasonal swings, such as a quiet stretch after a major project or a run of wet weather.
• Fast growth, where turnover rises and so does the GST bill, but nobody revisited the set-aside habit.

If it sounds familiar, you are in very ordinary company.

What should I do first if I cannot pay the BAS?

Lodge it. The ATO is clear that a BAS needs to be lodged by the due date even when there is nothing to report, and the same principle applies when there is something to report and nothing to pay it with. Late lodgement creates its own set of problems on top of the debt.

Quarterly due dates listed by the ATO are 28 October, 28 February, 28 April and 28 July. The February date carries an extra month, and lodging through a registered agent or online can add time on some quarters, so check what applies to you in ATO online services. Monthly reporters lodge by the 21st of the following month.

After lodging, contact the ATO or your registered tax agent before the due date if you can. Asking early is a very different conversation from being chased. Our guide to ATO payment plans compared with loans covers what to ask for.

What can the ATO do if the GST stays unpaid?

Unpaid amounts attract general interest charge, which accrues daily and compounds. The ATO may then use firmer steps. Its list includes garnishee notices, which can require a bank, a client or another party holding your money to send it to the ATO, and credit reporting of eligible business tax debts, with notice given first.

For company directors there is a further layer. The director penalty regime covers unpaid GST, PAYG withholding and super guarantee charge, and a director penalty notice carries a 21-day window. If GST is reported more than three months after its due date, the penalty can only be cleared by paying the company’s liability in full. That is a strong reason not to let GST sit. Read more on director penalty notices.

How do I clear an existing GST backlog?

You have three realistic routes, and they can work together.

1. Ask the ATO for a payment plan. Suitable when your ongoing income can carry steady instalments. Interest generally keeps building on a plan, and future obligations still have to be paid on time.
2. Clear it with finance. A property-secured loan from $20k to $5m, or an unsecured option typically from $5k to $500k, can pay the ATO in one go. We explain how in ATO debt loans for tradies.
3. Do a bit of both. Some tradies use a plan to buy breathing room and finance to finish the job once the cash flow picture is clearer.

An illustrative example, with no real business involved: a carpenter working as a sole trader has three quarters of unpaid BAS but is fully lodged and has steady deposits. A plan might work, provided future BAS is paid on time. If the debt had been left until a formal notice arrived, the picture would change and a single clearing payment could be the better call.

If you want to see which direction suits your numbers, talk to us about clearing the balance.

How do I stop it happening again?

The habit that fixes most BAS problems is dull and effective. Every time a client pays you, move the GST portion into a separate account before it can be spent. Do it the same day, every time.

Beyond that:

• Work out your likely BAS before the due date, not on it. Our GST and BAS set-aside planner helps you estimate it.
• Keep the set-aside account somewhere that is a small effort to withdraw from.
• Price jobs knowing what GST means for your cash timing, especially on large materials-heavy work.
• If cash is tight in a particular month, talk to the ATO or your tax agent before the due date, not after.

More on this in our page on setting money aside for BAS. If you are unsure of your tax position, speak to a registered tax professional about your own figures.

Ready to see what could fit your situation?

If a BAS backlog is keeping you up at night, putting your details in takes about a minute, and there is no credit check when you first enquire. That means you can see where you stand without it touching your file.

Your information stays with us rather than going out to a pile of lenders, so no strangers will start calling. A real person reads what you send and rings to work through it with you. The more accurate your answers are, particularly about what you owe and your turnover, the quicker we can match you properly the first time.

Check what you could qualify for