Why Has My BAS Gone Up This Quarter? GST, PAYG Withholding and Instalments Explained
You open your BAS, and the number is bigger than last quarter. The first question is usually whether something has gone wrong somewhere.
In our experience it rarely has.
The short version: your BAS payable is made up of three separate amounts. GST you've collected on sales, PAYG withholding on your team's wages, and PAYG instalments towards your own income tax. When the total goes up, one of those three has moved, usually because sales grew, the team grew, or the ATO recalculated your instalment after your last tax return was lodged.
Here's how to tell which one it was.
Your BAS is really three numbers
GST you've collected on your sales
PAYG withholding, the tax held back from your team's wages
PAYG instalments, prepayments towards your own income tax
The first two are amounts you collect and pass on to the ATO. The third is yours. Knowing which line moved tells you almost everything about why the bill changed.
1. More sales means more GST collected
GST is money your customers pay you, which you hold and pass on to the ATO each quarter. It flows through your bank account on the way past.
So when sales go up, the GST line goes up with them.
A quick example. Say quarterly sales rise from $200,000 to $288,000. That extra $88,000 carries $8,000 of GST, one eleventh of the increase. Your BAS is $8,000 higher, your margin is unchanged, and you've had a stronger quarter.
If this is the line that moved, your GST bill is essentially a receipt for a good three months. It's also worth checking that the extra revenue has actually turned into cash, which is a separate question and one we've written about in profitable but cashflow feels tight,
2. More staff means more PAYG withholding
PAYG withholding is the tax you hold back from your employees' wages and send to the ATO on their behalf. It's part of the gross wage you've already budgeted for, arriving at the ATO through your BAS.
Take a business going from five staff to eight during a hiring phase. More wages paid means more tax withheld, and the withholding line grows to match.
This line tracks the size of your team. When it goes up, it's usually because you've built something that needs more people in it. If you're weighing up another hire, the questions your numbers can answer walks through how to test whether the business can carry it.
3. PAYG instalments, the one we're asked about most
This is the line that surprises people, and it works differently from the other two. PAYG instalments are your own income tax, paid quarterly in advance rather than in one hit after year end.
How your instalment is set
Your instalment amount is calculated from your last lodged tax return. It reflects how the business performed in that year, and it holds at that level until your next return is lodged.
Think of it as a subscription that only updates once a year. Your trading can change considerably in the meantime while the instalment sits where it was set.
How you end up in the system
Once your income and tax payable cross the ATO's thresholds, you're entered into PAYG instalments automatically. There's no form to sign and nothing to opt into.
In practice, the ATO is assuming you'll earn something similar next year and collecting towards it as you go, which is why the instalment tends to arrive before your results for the year are known.
Why the June quarter often looks bigger
This is where the timing catches people out.
Tax returns are usually lodged partway through the following financial year. When yours is lodged, the ATO recalculates your instalment rate from that point forward, based on the return that just went in.
The quarters remaining in the year absorb that adjustment, and June is often one of them. A single quarter ends up carrying a correction that covers more than three months of trading, which can look like a sudden jump.
If your June BAS is noticeably larger than March, this is usually the reason. It's also one of the arguments for planning your tax position before 30 June rather than finding out afterwards.
The habit that makes BAS day simple
One of the most effective things we see clients do costs nothing to set up: a savings account kept separate from the everyday trading account, used only for tax.
The money moves across as it comes in, so it's never part of the cash you're working with day to day. When the BAS falls due, paying it is a transfer between your own accounts.
Option A: move it as you go. Each time you receipt a sales invoice, move the GST portion across. The tax component never mixes with trading funds, and the balance builds in step with your sales.
Option B: a set percentage each quarter. Transfer a fixed percentage of sales into the account, sized to cover GST, PAYG withholding and PAYG instalments together. Simpler to administer, and it covers all three lines in one movement.
Option A suits businesses with fewer, larger invoices. Option B suits high volume, where moving money on every invoice would be tedious. The right percentage depends on your margins, your wages bill and your current instalment rate, and it's a five minute conversation to work out.
Either way, the outcome is the same. When the BAS is due, the funds are already sitting there. It's one of the seven fixes in our guide to common cash flow problems, and one of the few that takes ten minutes to set up.
The bottom line
A bigger BAS usually reflects a better trading period. More sales, a growing team, or a tax return that finally caught up with how well the business has been doing.
The number is worth understanding rather than absorbing, though. If a figure on your BAS looks different from what you expected, talk to your accountant before you lodge. We'll walk you through which of the three lines moved and why, and if a change to how you set money aside would make next quarter easier, we'll set that up with you.
Kindred handles BAS, financial statements and company tax returns for established business owners across Australia.
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Common questions
Why is my BAS higher than last quarter?
Usually one of three things: you collected more GST because sales grew, you withheld more PAYG because your team grew, or your PAYG instalment was recalculated after your last tax return was lodged.
Do I have to pay PAYG instalments?
Entry is automatic once your income and tax payable cross the ATO's thresholds. It isn't something you opt into, though the amount can be varied in some circumstances. Talk to your accountant before varying it, because getting it wrong can attract interest.
Why is my June BAS bigger than the other quarters?
Tax returns are usually lodged partway through the following financial year. When yours is lodged the ATO recalculates your instalment rate, and the remaining quarters absorb the adjustment. June is often one of them.
How much should I set aside for BAS?
It depends on your margins, wages and instalment rate. Many businesses transfer the GST as each invoice is receipted, or a set percentage of sales each quarter covering GST, PAYG withholding and instalments together.
