PAYG vs BAS: What’s the Difference and What Do You Need to Lodge?

​If you’re running a small business in Australia, chances are you’ve encountered the terms PAYG and BAS but what’s the difference between them, and what exactly are you required to lodge?n this article, we’ll explain the differences clearly and concisely for small business owners, drawing from the latest 2025 financial year guidance from the ATO and Sageon’s expert tax planning services.

Understanding these obligations is essential not just for staying compliant, but also for effective financial planning, particularly as we approach the EOFY (End of Financial Year).

What is PAYG?

PAYG (Pay As You Go) Instalments are prepayments towards your expected income tax liability. This system allows eligible businesses and individuals to pay small portions of their tax throughout the year, rather than in a lump sum after lodging their annual tax return.

Key Facts:

• PAYG is managed via the ATO.

• Applies to individuals and businesses with an income tax liability of $4,000 or more.

• Instalments are generally paid quarterly.

• Helps manage cash flow and avoid bill shock at EOFY.

You can learn how Sageon assists with PAYG strategies on our Tax Planning page.

What is BAS?

BAS (Business Activity Statement) is a broader reporting tool. Lodged with the ATO, your BAS summarises several types of business taxes, including:

• Goods and Services Tax (GST)

• PAYG withholding (if you have employees)

• PAYG instalments

• Fringe Benefits Tax (FBT)

• Other taxes like wine equalisation tax or luxury car tax (if applicable).

Key Facts:

• BAS must be lodged monthly, quarterly, or annually depending on your GST turnover and ATO reporting cycle.

• PAYG instalments reported via BAS are separate from other components and still contribute to your income tax obligations.

• The ATO provides BAS lodgement and payment instructions based on your business type and reporting method.

What You Must Know Before Lodging

For business owners, the key to avoiding confusion between PAYG and BAS lies in understanding that they serve different tax purposes, even though they may occasionally be reported together. The ATO administers both through your Australian Business Number (ABN), but the obligations and calculations differ.

PAYG Instalments are essentially a forecasting tool. If your business earns over the ATO’s threshold, the system estimates your annual tax and breaks it into quarterly amounts. This approach aligns with the ATO’s push towards improved cash flow management for businesses, enabling you to ‘pay as you go’ rather than in one lump sum at tax time. The ATO calculates instalment rates or amounts based on your most recent tax return, and you may receive a notification in your myGov or Business Portal account if you’re required to start making PAYG instalments.

On the other hand, Business Activity Statements (BAS) are about reporting and paying a broader range of taxes. This includes GST collected on sales, any tax withheld from employee wages, and your PAYG instalments if applicable. It's worth noting that even businesses without employees still need to lodge a BAS if they are registered for GST.

For the 2025 financial year, one of the key updates from the ATO includes a greater emphasis on digital lodgement via the Business Portal, enhancing accessibility and tracking for businesses. If you’re working with a registered tax or BAS agent like Sageon, these lodgements can be handled professionally with added assurance around compliance and timing.

Common Mistakes to Avoid

It’s not uncommon for small business owners to mistakenly assume PAYG and BAS are interchangeable. Another common mistake is missing a lodgement deadline, particularly if you’re managing your own compliance without automation or reminders. The ATO imposes Failure to Lodge (FTL) penalties based on the size of your business and how overdue the statement is.

Also, be aware that selecting the wrong payment method on the ATO portal such as misallocating a BAS payment to a PAYG debt can result in unnecessary correspondence and payment mismatches. By working with an experienced team, you reduce these risks and ensure your lodgements are accurate and timely.

Sageon’s Strategic Support

At Sageon, we go beyond routine compliance. Through our tax planning services, we assess your entire financial picture to ensure you’re not just meeting deadlines, but optimising outcomes. Our clients benefit from proactive alerts, simplified workflows, and strategic cash flow forecasting based on PAYG and BAS schedules.

We also provide clarity around your lodgement frequency and thresholds whether you qualify for annual GST reporting or need quarterly lodgements. Our tailored approach ensures your business isn't over-committed or under-prepared during EOFY season or quarterly reporting cycles. Sageon keeps you informed and ahead of changing tax regulations. And with direct guidance from the ATO always changing, especially in areas like SMSFs and digital tax reporting, Sageon stays on the pulse so you don’t have to.

Ready to Lodge Confidently?

Understanding PAYG vs BAS goes beyond ticking boxes, it’s about gaining control over your tax responsibilities and making informed decisions that strengthen your financial position. From sole traders and partnerships to expanding companies, taking the right approach now helps you avoid unexpected challenges later.

Sageon provides the clarity and expertise to help you decode your obligations, streamline the lodgement process, and approach tax planning with confidence. Reach out today and let our team support your business with strategic, reliable advice.