Goods and Services Tax, often known as GST, is collected by registered businesses.
GST is a 10% tax levied on most goods and services sold or consumed in Australia. Usually, businesses who sell these products and services include the cost of GST in their prices.
GST applies to most businesses across Australia and it’s highly likely that your business will be affected by the tax.
You must register for GST if:
If your business doesn’t fit into one of the above categories, you don’t have to register for GST. Learn more about GST from the ATO here.
Note that GST turnover is your business’s gross income, not your business’s profit.
Your business must register for GST when it makes $75,000 income within a financial year (or $6,250 or more each month). If you haven’t registered for GST, and you become aware that your GST turnover will exceed the $75,000 per year threshold, you will have to register for GST within 21 days.
It’s a good idea to keep an eye on your turnover to help identify whether you need to register. You can quickly check your monthly turnover in your xero file or the online accounting system that you use. If you’re not yet using online accounting software, talk to us about your options, as this will make reporting and preparing for GST registration much easier.
Many business owners register their businesses from day one, regardless of income. If your GST turnover is below the threshold, registering for GST is optional. If you do register and your turnover is below the threshold you still must include GST in your fees and claim GST credits for your business purchases.
Many businesses don’t realise they have exceeded the income threshold. This can result in having to pay GST on sales to the ATO even if you haven’t included it in your prices – so you could lose one-eleventh of your income. You may also have to pay penalties and interest.
You need an Australian Business Number (ABN) to register for GST, as the ABN is part of the GST system. Your ABN will also be your GST registration number.
You can register for GST and apply for your ABN at the same time.
You can apply to backdate your GST registration.
If you’re registered for GST, you’re entitled to claim input tax credits for the GST paid on items you’ve bought for business use. If you’re not registered, you can’t claim input tax credits.
GST credits are a potential amount of money your business might be able to claim from the ATO. If at the end of the reporting period your GST credits are higher than the amount of GST you have to pay the ATO, you will be able to get a refund.
In order to receive GST credits, you must submit a Business Activity Statement or an Annual GST return which Balanced Beans can prepare on your behalf.
Need help? Talk to our Newcastle and Hunter Valley Accountancy and Bookkeeping specialists about whether GST applies to your business and get the help you need to register.
(02) 4046 1000