What Owners Should Know Before Registering For GST
In this guide, we will outline all the essential facts around registering for GST as an Australian business. Goods and services tax is a mandatory part of the Australian economy, and below, we will go into detail about it and how it may affect your business.
Please note: This guide is not a substitution for professional advice given by an accountant or tax professional.
You should always seek advice before making any changes that could impact your financial health.
GST is a goods and service tax added to an extensive range of products and services within Australia. Businesses must register For GST if their total business revenue exceeds the threshold of $75,000 ($150,000 for charities). Businesses operating a limousine, taxi, or ride-sharing must register regardless of revenue.
Are you starting a business? Check out our step by step: How to set up a business.
What Is GST?
GST or (goods and services tax) is a tax that was brought into effect across Australia in the year 2000. This was brought in as part of a new tax system named the “good and services tax act of 1999.”
The purpose of GST was to simplify the existing sales tax frameworks from each state government and to create a standard federal tax that could be applied to goods and services across Australia.
GST is applied to the sales of a product or service within Australia and, in turn, paid by the consumer of the goods on top of the retail cost.
The tax itself is 10% which, as mentioned, is added to the purchase price of the product or service.
In Australia, all product prices advertised to consumers are GST inclusive by law.
If a product or service is explicitly advertised to a business, then including GST in the price is optional. However, the price must state whether it is “inclusive” or “exclusive” of GST.
How Does GST Registration Effect My Business?
Like many of the products and services we buy, your businesses goods may not be exempt from GST.
In this case, if you are registered for GST, then you will be required by law to charge GST on the goods or services you provide.
Regardless of whether you are a sole trader or company owner GST can still affect you.
- Charging GST will mean your customers will end up paying 10% more for your products which may impact your overall sales.
- Another factor to consider is if you are registered for GST, You may be able to claim back, as a credit, the GST on services and goods purchased for the business.
- Being registered for GST will mean greater reporting and paperwork which is also an additional cost to the business.
- Having to report and pay GST will require a greater level of cash flow management as you will need to pay the GST portion of any sales to the ATO.
GST Applied Products And Exemptions
Another thing to consider when registering for GST is whether your product is exempt from this tax or not. Most products and services sold in Australia will attract a goods and services tax.
There are, however, goods that may be exempt from paying GST.
Products such as some medical items and basic food staples are GST exempt; we have included a link here and below to a detailed list of these exemptions.
There are also certain situations in which a sale of a business is exempt from GST.
This is when a business is sold as a going concern, which is when the business, along with all materials needed to operate, are sold, and the business is kept running up to the settlement date.
GST Registration Eligibility
To Register for GST. Your business must first determine if it is eligible and then if it is mandated.
To be eligible, you must hold an ABN (Australian Business Number) and operate a business within Australia.
If you operate a business with a turnover of $75,000 not inclusive of GST, then you must be registered for GST in Australia. Operating as a non-profit, the threshold is raised to $150,000 in revenue.
If your business earns under the thresholds, then registering for GST is optional.
Ridesharing, limo, and taxi business must register for GST irrespective of their annual revenue. Registering for GST will also allow you to claim and relevant fuel tax credits.
How Do I Register For GST?
1.Check You Have An ABN
Before you can register for GST, you will need to ensure you have an ABN if you don’t have an ABN check out our helpful guide: how to apply for an ABN.
2.Work Out Your GST Turnover
The next step when registering for GST is to work out your total GST business turnover to assess whether you are above the threshold relevant to your industry and core service.
If your turnover is above the threshold of $75k and $150k for charities ($0 for taxi and rideshare), then you MUST register.
Important Note: Ensure when you are calculating your GST turnover you do not include income derived from the sale of a capital asset. If you are unsure please see advice from a tax professional.
3.Login Or Create An Account With The Online Business Portal
The online business portal is an online government account for businesses to access tax and superannuation services. This also makes dealing with the ATO in related matters a much more efficient process.
4.Register For GST Within The Portal
The next step when registering for GST is to fill out the GST registration section within the portal. Once you have completed this, you will have completed the process and will be notified by the ATO.
4.Understand Your BAS Obligations
Now that you are registered for GST, you will have greater reporting obligations with the ATO. One of these is your BAS or “Business Activity Statement“, which must be completed on a regular basis.
This is a detailed list of GST exempt products provided by the Australian tax office.
An online account with the Australian taxation office, for small business tax and super services.
It’s very important you stay on top of your finances; we recommend using a solid bookkeeping platform to help with this.
Now that you understand registering for GST it’s critical that you keep your books in order so that you can accurately project whether or not you will hit the GST threshold.
One of the simplest ways to do this is using accounting or bookkeeping software to track your revenue and expenses. If you are unsure of what software to choose below we have linked a helpful comparison.
Check out our list of free accounting software for small to medium businesses.