- A lot of small business owners ask themselves the same question: "Do I need to register for GST?"
- In order to spare you the trouble of looking for answers all over the Internet, we present you an article that covers GST registration.
- Keep reading to find out the legal requirements of GST, what you need to do before you register and how to register for GST.
"Do I need to register for GST?"
This is a question I am often asked by potential clients. So what is the answer?
Well, it depends.
When Do You Need to Register for GST?
To determine whether you need to register for GST, the first thing you need to ascertain is whether you are operating a business or is it just a hobby.
I’ve written about this in previous blogs shared so I will not revisit this. Let’s just assume that you are running a business and you have applied and received an Australian Business Number (ABN).
To register for GST, you must make a supply of goods and service called taxable supplies in the course of carrying on an enterprise. That supply is for consideration and is connected with Australia.
Do You Have to Register for GST if You Annual Turnover is Less Than $75,000?
You do not need to be registered if the annual consideration received from supplies is $75,000 or less. This trigger point increases to $150,000 if you are a Not-For-Profit entity.
Only entities that are registered or required to be registered can charge GST.
Whilst it is optional to register for GST if you earn under $75,000, it is worthwhile to consider GST registration as you will be entitled to claim input tax credits on any GST paid on taxable supplies purchased for use in the business.
Here is an example of why:
Company XYZ Ltd purchases stationary for $100 plus GST registration for use in the business. So the gross amount paid at purchase is $110.
If registered, then XYZ Ltd firstly claims the $10 GST as an input credit. As a result, they pay only $100 for the stationary. As it is also a deductible expense, and the company tax rate is 30%, they will receive a tax benefit of $30 ($100 x 30%). After taking this into consideration, a GST registered company’s after tax cost for $100 of stationary is $70 ($110 - $10- $30).
If the company does not have GST registration, then they are not entitled to claim the $10 input tax credit so, the after tax cost of the stationary becomes $77 ($110 – ($110 x 30%))
If you operate as a sole trader or through a partnership or trust entity, then the quantum of any benefit will depend on your marginal tax rate.
What Are Taxable Supplies You Need to Know About Before You Register for GST?
Taxable supplies are supplies of goods and services that are NOT
- GST free supplies (such as fresh food), or
- Input taxed supplies (such as bank interest).
The full list of these types of supplies is defined within the GST ACT.
What Obligations Do I Have if I Register for GST?
In the ordinary course of your business, you can only charge GST if you are registered or required to be registered. You must issue an invoice with the words “Tax Invoice” showing your entity's name and ABN, date of the invoice and the amount of GST. Note that this is required. Today’s Accounting systems have pro-forma tax invoices.
Your other obligation is to render a BAS return and remit to the ATO along with the net amount of GST collected.
Large GST payers are required to do this monthly; however, most small businesses will render this quarterly. Again, today's accounting systems assist greatly in the preparation of this information before you register for GST.
How Do I Register for GST?
To register for GST you must have an ABN. Once you're registered an ABN you have several options to apply for GST:
- Through your accountant or tax agent
- Via the ATO's Business Portal
- By calling the ATO on 13 28 66
Do you have any tips and things to know before a company needs to register for GST?
Editor's Update 07/07/20:
Thanks for reading our article by Michael Prior, Principal at PB Advisory Group. We hope it has helped you gain a better understanding of GST registration and requirements for small businesses in Australia. Members at SavvySME have additional questions on this topic, so we have answered some of these in the FAQ section below.
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