What is GST and does it apply to all businesses?
GST is the Goods & Services Tax which was introduced to Australia 1999 as a 10% tax surcharge on most goods and services except for things like foods, doctors visits, some childcare services, etc. In 2019 they finally made the sale of menstrual pads and flow cups GST-free! Thank goodness we woke up there!
When it comes to your business, all you need to know is, if your business has or you expect it to have turnover of $75k (excluding GST) for the sale of goods and services (regardless if those sales are GST-exempt items) you MUST charge GST (if applicable) and therefore you need to register for GST.
In your monthly or quarterly BAS (Business Activity Statement) lodgements, you will be declaring to the government how much you have earned as a business, what you have charged in GST, and what you are claiming as input tax credits. The net difference is what you owe the government.
At the end of the financial year you can then claim the tax deductible expenses with your accountant.
Working out if I need to register for GST
First, when working out your projected revenue to see if you fall within the $75k threshold, do not include:
- Amounts you receive for the sale of a business asset (such as the sale of a capital asset)
- Any sale you make, or are likely to make, solely as a consequence of ceasing to carry on an enterprise or substantially and permanently reducing the size or scale of an enterprise
When to register for GST
You can either wait until you hit the threshold or if you know you are going to hit the threshold register beforehand and start including the GST on your sales which may be an easier option if you are sure.
If you didn’t register for GST and then hit the threshold, you may have to pay GST on sales made since the date you were required to register even if you didn’t include GST in the price of those sales. So this is a good reason to register beforehand so you can charge the GST to your customers as it is intended so you are not out of pocket!
If you didn’t register for GST and end up in this scenario you need to register within 21 days of your GST turnover exceeding the relevant threshold.
How to register for GST
Registering for GST is very easy. All you need is:
- An Australian Business Number (ABN) which if you are reading this you should already have. If not you can register here. https://www.abr.gov.au/business-super-funds-charities/applying-abn
- An account with the Business Portal which you will need for all of your business tax and superannuation activities if you would like to do it yourself and otherwise you can ask your BAS agent (i.e. MicroChilli!)
Once you are registered, you need to ensure your account software, e.g. Xero, is set up correctly to ensure your invoices have GST on them.
Navigating the new world of business is not straight forward but this is where having a bookkeeper who can hold your hand and be there when things just don’t make sense really helps!