First things first – what is GST? The Goods and Services Tax (GST), is part of the cost of doing business in Australia. It’s a broad based government tax applied to most goods and services sold or consumed within Australia. GST is a compulsory 10% tax that your business will need to add to anything you sell; either consumer goods or services. Your business is liable to pay GST once it has a turnover of A$75,000 per annum or more.
Effectively, once registered for GST, you’ll become a tax collector for the government. You’ll need to collect GST and pay it to the Australian Tax Office either monthly, quarterly or annually. The GST equates to one-eleventh of the sale price of your good or service.
However, if you’re a business registered for GST, you’re entitled to claim GST credits; that’s the amount of GST you’ve paid on anything you’ve purchased to run your business. It’s important to note that not all consumer goods have GST applied. For example, there’s no GST added to some food – so there’s no tax credit on this type of food if used in your business.
Do you need to register for GST?
As an Australian business, you’ll need to register for GST if:
- your business has a GST turnover of A$75,000 or more (this is your business’s gross income NOT the profit);
- your non-profit organisation has a turnover of A$150,000 per year or more;
- you provide taxi travel for passengers in exchange for a fare as part of your business; you need to register regardless of your GST turnover. This rule applies to both taxi owner drivers and people who just rent a taxi.
The responsibility sits solely on the shoulders of the business owner when it comes to registering for GST. Once you’ve completed your business plan, if you believe your turnover will exceed the A$75,000 threshold it’s probably a good idea to register. Of course, if your business doesn’t fit into one of the above categories you don’t have to register for GST. However, if you’re unsure speak to your accountant.
I have an overseas business – do I register for GST?
If your business is based overseas but you’re importing services and digital products to Australian consumers and make over A$75,000, you must register for GST.
From 1 July 2018, an overseas business selling low value imported goods to Australian consumers, such as clothing, cosmetics, books and electrical appliances, will need to register for GST if expected turnover is more than A$75,000. This will affect goods valued at A$1000 or less on items like.
When should I register?
Once you’ve prepared your business plan and have an idea of what you expect your business to turnover, you can make the decision to register for GST. However, if you aren’t really sure what you might earn as a start up then it’s ok to wait and make the decision later.
When you become aware that your GST turnover will exceed the A$75,000 per year threshold, you have 21 days to complete your GST registration. If that’s you, it will be important to keep a close eye on your turnover so you know when you need to register.
Of course, you may decide to register for GST even if your turnover is below the A$75,000 threshold. If that’s the case, then regardless of your turnover, you must include GST in your fees/price of goods. You can then also claim GST credits for your business purchases.
How do I register?
Registering for GST is easy. First you’ll need an Australian Business Number (ABN) . Your ABN is an eleven digit number that helps identify you and your business with the Australian Tax Office. As such, your ABN will be used as your GST registration number.
Try the Business Registration Service. where you’ll be able to register for your ABN, GST and other taxes on the same form.
Of course if you are unable to register online, contact the ATO or register for GST through a registered tax agent.
What else do I need to know?
Tax invoices – Once you’ve made the decision and have registered for GST, you are required to produce tax invoices rather than just invoices. Tax invoices simply show the consumer what GST has been applied to their purchase.
GST credits – as a business now registered for GST, you’ll also be entitled to claim tax credits. In other words, you are entitled to claim back the GST that has been charged on any purchases you’ve made for your business. This amount is offset against any amounts that you owe to the ATO.