Mark looked at the calendar and felt the familiar knot. 

"BAS is due 28 October," Tessa said. "And I have no idea if what's in Xero is right." 

They'd been tracking transactions all quarter. Bank reconciliation was done, invoices had been sent, but when it came to actually preparing the BAS, Tessa didn't know where to start. 

"Can’t you just run the report?" Mark suggested. 

"It's not that simple," Tessa said. "I need to check the GST coding and make sure the bank rec is complete, and verify that everything's been coded correctly before I lodge." 

Getting your BAS right takes more than just running a report. It takes understanding what you're looking for. 

Here's how to do it properly.

WHAT IS A BAS AND WHY IT MATTERS 

BAS stands for Business Activity Statement. It's your quarterly tax return to the ATO. 

You report: 

• GST collected (money you collected from customers) 

• GST paid (money you paid on expenses) 

• PAYG withholding (tax you've held back from employees) 

• Salary and wages 

• Other obligations depending on your industry 

Get it right and it's straightforward. Get it wrong and you're explaining to the ATO why your numbers don't match their records. 

Due date for Q1 (July-September): 28 October

BEFORE YOU PREPARE YOUR BAS 

Don't just jump into the BAS form. There's prep work first. 

Step 1: Complete your bank reconciliation 

Go to Accounting > Bank Accounts 

Reconcile every account through 30 September. Don't leave transactions unreconciled. 

Unreconciled transactions create gaps in your records. When the BAS doesn't match what the ATO has, the first thing they ask is: "Is your bank rec complete?" 

Step 2: Check your GST coding 

Go through transactions for the quarter and spot-check GST coding. 

Walk through maybe 20-30 transactions from different categories. Are they coded correctly? 

Common mistakes: 

• Personal expenses coded as business (no GST claimable) 

• GST-free purchases coded as GST on purchases (can't claim the GST) 

• Wrong GST rate (10% vs 15%) 

Fix obvious errors before you prepare the BAS. 

Step 3: Review your PAYG withholding 

If you've got employees, check that PAYG withholding is being done correctly. 

Go to Payroll > Payroll Summary for the quarter. 

Does the PAYG withheld look reasonable? Should be roughly 37-45% of gross wages depending on award rates. 

If it looks way off, check with your payroll settings before you lodge. 

Step 4: Check for unallocated transactions 

In Accounting > Bank Accounts, look for transactions that are still unallocated or in suspense. 

These shouldn't be in your BAS. They need to be properly coded or moved.

PREPARING YOUR BAS IN XERO 

Once prep is done, here's how to prepare it. 

Step 1: Go to your BAS screen 

Go to Accounting > Tax > BAS (or IAS if you're not GST registered) 

You'll see options for the quarter you're preparing (July-September 2026). 

Step 2: Review the automatic calculations 

Xero pulls information from your coded transactions and calculates: 

• Total GST collected 

• Total GST paid 

• PAYG withholding 

• Salary and wages 

Review each field. Does it look right based on what you know you've done this quarter? 

Step 3: Check the detail behind each number 

Click into each line item to see the transactions that make up that total. 

For example, click on "GST collected" and it shows you every transaction coded as "GST on sales". Does it make sense? 

Common things to check: 

GST Collected - Is this your revenue? Does it match roughly with what you invoiced? 

GST Paid - Are these actual business expenses? Or is there personal stuff in here? 

PAYG Withholding - Do the employee names and amounts make sense? 

Salary and Wages - Is this the right total for the quarter? 

Step 4: Adjust if needed 

If you spot errors, don't lodge yet. Go back to the transactions and fix them. 

Common fixes: 

• Change the GST code on a transaction 

• Move a personal expense out of business 

• Correct a miscoded supplier invoice 

Once you've fixed it, come back to the BAS screen. The numbers will recalculate automatically. 

Step 5: Lodge 

Once everything looks right, click to lodge. 

Xero sends it directly to the ATO. You get confirmation it's been received.

COMMON BAS MISTAKES TO AVOID 

1. Not reconciling first 

You run the BAS without reconciling. It doesn't match what the ATO has. You get a letter asking for an explanation. 

Reconcile first. Always. 

2. Personal expenses in business 

You accidentally coded a personal credit card transaction as business. Now your GST paid is higher than it should be. 

Check your transactions before lodging. 

3. Wrong GST rates 

You've got some transactions coded at 15% instead of 10%. The ATO notices the discrepancy. 

Use the right rate. Check before you lodge. 

4. PAYG withholding errors 

Your PAYG looks way higher or lower than expected. Either you've calculated wrong or someone's on the wrong tax rate. 

Check payroll settings before lodging. 

5. Lodging late 

You meant to do it before the 28th. Now it's 30 October and you're scrambling. 

Do it early because 28 October arrives faster than you think.

WHAT TESSA DID 

Tessa started BAS prep on 15 October - two weeks before the deadline. 

She reconciled all bank accounts. Found one transaction still unreconciled (an invoice that hadn't been coded). Fixed it. 

She spot-checked GST coding. Found one personal expense that had slipped through. Removed it. 

She checked PAYG withholding. It looked reasonable. 

She ran the BAS. Everything balanced. She lodged on 20 October. 

When the ATO's confirmation came through the next day, she felt relief instead of panic. 

Disclaimer: This information is general in nature and doesn't take your personal circumstances into account. Always seek professional advice for your specific situation.