Understanding what GST is, how it works, and how it can impact businesses is crucial for businesses. In this blog, we’ll discuss everything you need to know about GST.
What is GST and How Does It Work?
Goods and Services Tax is a tax of 10% imposed on most services, goods, and other items consumed or sold in Australia. Things that don’t have GST included are known as GST-free sales.
What Do Registered Businesses Do?
Usually, businesses and other organisations registered for GST need to:
- include GST in the price they charge for their services
- claim GST credits included in the price of goods and services they purchase for their business.
What Do You Need to Do for GST?
If you run a business or other organisation and have a GST turnover of $75,000 or above ($150,000 or more for non-profit organisations), or you offer taxi travel, you must:
- register for GST
- check whether your sales are taxable (i.e., liable for GST, and not exempted because they are GST-free or input-taxed) and include GST in the price of your taxable sales
- issue tax invoices for your taxable sales and get tax invoices for your business purchases
- claim GST credits for GST included in the price of your business purchases
- account for GST on either a non-cash or cash basis and put aside the GST you obtained to pay it to the ATO when due
- file activity statements or annual returns to declare your purchases and sales, and pay GST to the ATO or receive a GST refund.
How Does GST Registration Work?
Not all businesses need to be registered for GST, but if you are liable to register for GST and fail to do so, the penalty may apply. If you need to register for GST, make sure to do so within 21 days. Before registering for GST, you must have an Australian Business Number (ABN). You can get an ABN when you first register your business name or at a later time. You are required to register for GST once, even if you are running more than one business. If you are no longer required to be registered for GST, you can cancel your GST registration.
When Do You Need to Register for GST?
You need to register for GST:
- When your business has a GST turnover of $75,000 or more.
- When you start a new business and expect that your business’s turnover may reach the GST threshold in the first year of operation.
- If you have already reached the GST threshold.
- If your non-profit organisation has a GST turnover of $150,000 per year or more.
- When you provide limousine or taxi travel for passengers irrespective of your GST turnover – this applies to both owner-drivers and if you rent or lease a taxi.
- If you want to claim fuel tax credits for your business.
What If You Don’t Register?
If you are not registered for GST, make sure to check each month to see if you are expected to reach the threshold or have already reached the threshold. You should register within 21 days of your GST turnover exceeding the threshold. If you don’t register for GST and are required to, you may need to pay GST on sales made since the date you were required to register.
Claiming GST Credits
You may be able to claim a credit for any GST included in the price you pay for things you use for your business. This is known as an input tax credit or a GST credit. To claim GST credits in your BAS, you should be registered for GST. You can claim GST credits if:
- you are likely to use your purchase solely or partly for your business, and the purchase is not related to making input-taxed supplies
- the purchase price included GST
- you paid for the goods you purchased
- you have a tax invoice from your supplier
Conclusion
As a business owner, you must work out whether you should register your business for GST. If you are unfamiliar with GST rules and regulations, you can speak to Tax Consulting Partners.
