What is GST?
Goods and services tax (GST) is a tax of 10% on most goods and services sold in Australia. If your business is registered for GST you will need to collect this 10% tax amount from you customers and then pay it to the Australian Taxation Office (ATO) when it is due.
Who needs to register for GST?
Just because you have a small business doesn’t necessarily mean you need to register for GST.
You must register for GST if:
- your business has an annual turnover of $75,000 or more
- your non-profit organisation has an annual turnover of $150,000 or more
- you provide taxi or limousine travel (including ride-sharing drivers) regardless of annual turnover
- you want to claim fuel tax credits for your business
If none of the above applies to you then GST registration is optional.
Although you don’t need to, you may decide to voluntary register for GST. There are benefits of registering for GST, such as being able to claim GST on your business expenses, but there are also extra things you need to do, such as quarterly Business Activity Statements (BAS) lodgement with the ATO, so do give thought to all the pros and cons before you decide whether to register for GST or not if it’s not a requirement for your business.
GST registration is based on your income not your profit.
Let’s say your business annual income is $80,000 and you have $35,000 of expenses. Your profit is income minus expenses, so in this instance your profit is $45,000 (which is your $80,000 income minus the $35,000 of expenses). Even though your business only makes $45,000 profit, you still need register for GST because your annual income is over $75,000.
If you are just starting a business and believe your business will reach $75,000 in the first year, then you need to register for GST.
And if you’ve been in business a while and not registered for GST but project your income will reach $75,000, then you also need to register for GST.
You need to register for GST within 21 days of your income reaching $75,000. If you fail to register in time, you will be required to backpay the GST and you may have to pay penalties and interest.
How to register for GST
GST registration is simple and it doesn’t cost you anything.
Before you register for GST you need to have an Australian business number (ABN). You can apply for an ABN here: Australia Business Register – Apply for an ABN
Once you have your ABN you can register for GST: ATO – Registering for GST
What to do after GST registration
When you are registered for GST you will need to:
- add GST to the prices of the products and services you sell
- your customers must be given a tax invoice (not just an invoice)
- lodge BAS with the ATO to report your total sales, GST on sales and GST on purchases
- pay any GST due to the ATO
If you are ever unsure or have questions about what is right for your business, do make sure you get professional advice.