- Registering for GST (Goods and Services Tax) in Australia, means that your business is obliged to include the tax amount in the price you're going to charge consumers.
- While registering for GST sounds easy, your business needs to have a turnover of $75,000 to be eligible.
- But there are a few steps to follow after you have registered your business for GST, such as keeping your bookkeeping up to date at least quarterly, and much more.
Tax can be confusing.
As a small business owner, you may be wondering what GST is and whether or not you are required to pay it.
We've got you covered in this guide.
What is GST?
Goods and Services Tax (GST) is a tax levied on goods and services sold in Australia. Businesses who are registered for GST must include GST in the price they charge for goods and services.
The good news is that businesses can also claim GST credits for any GST they pay on goods or services they use in their business.
Do I need to register for GST?
You must register for GST if your sales are GST taxable and your turnover is more than $75,000. Importantly note that the $75,000 test relates to business turnover, not profit.
In other words if you are turning over $76,000 but only making a profit of $5000 (after $71,000 in expenses is subtracted) you still need to register.
You can register for free on the ATO’s business portal or ask your tax agent to assist you.
If your turnover does not meet the $75,000 GST taxable supplies test, you can still choose to register for GST.
You might want to do this if, for example, you are about to buy an expensive item for your business like a $45,000 car and you want to claim a large GST Credit. To work out a GST Credit on an item you simply divide the price by 11.
So in the case of a $45,000 car you could claim a GST Credit of $4,090 ($45,000 divided by 11) as long as you are using this car solely for your business activities.
So if only GST taxable supplies are included in the $75,000 turnover test – what are GST taxable sales/supplies? Basically almost all sales of goods and services in Australia are taxable unless they are GST free or exempt.
GST free sales are mainly related to food, education, medical, religious, charitable and government related costs, as well as exports and residential rental properties. Seek advice from your tax agent or the ATO if you are unsure as to whether your sales are taxable or not.
The importance of tax invoice details
Presuming that your sales are GST taxable you must issue a tax invoice for every sale over $82.50 and this invoice must clearly show the following details;
- that it’s a tax invoice,
- your business name and ABN,
- the date,
- the items,
- the GST amount or a statement such as ‘total price includes GST.’
In addition, sales for more than $1000 also need to include the buyer’s name and ABN.
When a supplier gives you an invoice, check that it meets all of the above requirements so that you can be sure you will get your GST credit.
What do you do after registering for GST?
Once registered for GST you need to lodge a Quarterly Business Activity Statement (BAS). Businesses with a turnover of less than $75,000 can lodge a BAS annually. Whilst this requirement does add extra bookkeeping burden on small businesses, there are numerous benefits of quarterly BAS statements.
Firstly, you have to keep your bookkeeping up to date, well, at least quarterly.
Any good business advisor will tell you that it is vital for your business to have up to date business records. You want to know whether you are making a profit or a loss.
If you are making a profit, great, and good bookkeeping records will show you what sales/supplies are making you the most money and which expenses are costing you the most. This allows you to plan and improve your profits by increasing your profitable sales and decreasing expenses.
More so, if you are making a loss, you want to know about it sooner than later so that you can do something to improve the business before it’s too late. So quarterly bookkeeping is a good thing, monthly or daily bookkeeping is even better.
There are plenty of easy-to-use apps and software programs that can assist you in staying on top of your bookkeeping. Xero is my personal favourite and it comes with an app so you can literally do your bookkeeping whilst sitting on the bus or any other spare time you have.
Xero also allows you to lodge the BAS through the Xero software.
If you don’t use a software package, you will need to lodge the BAS through the Business Portal or using a paper form.
Whichever way you choose to lodge your BAS – make sure you do it on time. They are due the 28th day after the end of the Quarter.
For example; the quarter 1 July to 30 September is due on the 28th October.
For some businesses GST, BASs and Bookkeeping are relatively straight forward and easy to manage. For others, it can all be tricky, so always ensure you have a good, reputable and licensed tax agent by your side to assist whenever you are unsure. You can search to ensure your agent is registered.
The ATO do GST Audits and can penalise heavily if you have got it wrong.
The ATO can also prosecute you if you have tried to deliberately defraud them, so it’s definitely not worth getting it wrong. When in doubt, seek qualified advice, otherwise, you've got the basics now.
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