Published on Apr 1, 2019
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The goods and services tax (GST) is a broad based tax of 10% on most goods and services. A small business or sole trader must register for GST once they have an annual turnover of $75,000 ($150,000 for not-for-profits). However, this isn’t the whole story.
GST registration – the nitty gritty
If you aren’t registration for GST it means you don’t charge GST and you don’t use the word ‘Tax’ on your invoices for the goods and services you provide. So in theory your prices would reflect that you aren’t registered for GST and would be lower than companies charging GST. But in reality your pricing is really up to you. You can charge whatever the market will bear, you just can’t charge GST.
Basically, when you’re registered for GST you collect the GST you are paid and you pay it on to the Australian Tax Office (ATO). In the same way, when you pay GST to others you get to claim that.
Each month or quarter you tell the ATO how much GST you have paid, and how much GST you have collected, and you will then either pay the difference or be issued a GST credit whichever applies.
If you aren’t registered for GST you just pay tax invoices issued to you including GST. You may then be able to claim this as a business expense or deduction.
Can I register if I earn less than 75k?
Yes you can. Sometimes it’s worth being registered so you can a). charge more (+10%) and b). you can recoup some or all of the GST you have paid out to other businesses. Plus some people can be wary about doing business with someone who isn’t registered for GST.
Registering for GST is something you need to discuss with your accountant. You may benefit from being registered even if they haven’t yet reached the mandatory threshold.
It’s important to remember that if you register for GST you will then need to submit regular business activity statements (BAS).
What if I voluntarily register and it doesn’t work out?
You can cancel your registration if you find it isn’t wasn’t the right thing for you, and then re-register when your turnover hits $75k or more. Go to the ATO website for advice on how to cancel your GST registration.
The bottom line
There is no simple one-size-fits-all answer, each situation is different. When it comes to tax it’s important to get professional advice from your accountant or tax agent. Or talk to someone at the ATO about GST as a starting point.
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