About the Australian Goods
and Services Tax (GST)
GST, or Goods and Services Tax, is a tax paid by consumers on goods and services they purchase in Australia. Currently GST is an extra 10% added onto the overall price of the good or service. Introduced in the year 2000 by then Prime Minister John Howard, GST was designed to boost the taxes the government collects and to diversify where the tax comes from. Since its inception GST has been extended to cover a range of goods and services as new industries have opened. This includes purchases from online stores, digital and physical. Now almost every business needs to calculate GST into their pricing. For easy GST calculation, check out our GST calculator above.
GST has been designed to affect only the end consumer. This is why businesses can claim GST tax credits when they are registered. For the consumer, a pre-calculated 10% GST will be added to the price of most goods, except those which are GST free. Generally, businesses will calculate this GST into the end price of their goods or services, making purchases easier for their customer.
Businesses will have their own obligations under GST that will affect them. These include the collection of GST, the claiming of GST credits and the lodging of a BAS. If you need GST advice talk to our registered agents at GSTRegister.com.au.
Businesses have a series of obligations under the GST system. These include registering for GST, GST collection, lodging a BAS, and claiming GST credits.
Registering for GST is important for all businesses with an expected turnover of more than $75,000 in 12 months. Registering is simple with online tools such as GSTRegister.com.au.
You will also need to collect GST from each sale. This GST should be calculated at 10% on top of the listed price, or 1/11 of the purchase price. For easy calculation check out our GST calculator above.
Lodging a BAS is an important obligation for businesses. In a BAS you will calculate the amount of GST you have collected on behalf of the ATO and you will calculate how much GST the ATO owes you. The latter is referred to as GST Credits.
GST Credits are the amount of GST you have paid as a business in the creation of a product you have sold. You will need to calculate the amount of GST you have paid in your expenses for your BAS. This amount will then be taken off the GST you owe the ATO.
GST is an additional 10% on the price of almost any product or service you offer. These exclude GST free products and services. To find out the amount of GST you need to charge or how much GST you paid you can use our easy calculator above. For those who would like to know the calculations our GST calculator performs here is a quick rundown:
- To calculate the amount of GST you need to charge on our product our GST calculator simply adds 10% of the sale price onto the sale price. So, if the product you sell is $1,000 our GST calculator gets 10% of that, $100, and adds it to the sale price. The GST calculator then will provide an answer of $1,100.
- To calculate the amount of GST you paid, our GST calculator simply takes 1/11th away from the purchase price. If the product is $1,100, the calculator works out 1/11th, $100, and removes it from the purchase price. The GST calculator will then provide an answer of $100 GST.
When, as a business, you purchase a product from another business you pay GST. These could be suppliers, computer manufacturers and much more. These businesses will collect GST from that sale on behalf of the ATO. If the purchase was a business purchase, you will then use the product or service to create a product or enact a service for a consumer. GST is only supposed to be charged to the end consumer, so all the GST that you have paid in bringing together the equipment, supplies, and resources you need to provide the product to the end consumer can be paid back to you. These are called GST Credits. You will calculate and claim GST Credits on your BAS.
For easy calculation of your GST tax credits use our GST calculator above.
If your business reaches one of two criteria you must register for GST. These criteria include:
- Your business has a turnover over $75,000 in a 12-month period. If you are a non-profit organisation you will only need to reach a turnover of $150,000.
- You provide a taxi service in exchange for a fare as part of your business. This could be whether you are a regular taxi driver or a rideshare driver for Uber, Ola, or Didi.
As the owner of a business, it is your responsibility to ensure that you register once your annual turnover rate looks to exceed $75,000 in a 12-month period.
If you have an annual turnover below $75,000 you still have the option of registering for GST, allowing you to take advantage of GST Credits.
Registering for GST is easy with online tools like GSTRegister.com.au. Simply spend 2 minutes filling out the online form and their registered agents will do the rest. You can then calculate the amount of GST you need to charge on your products through our simple GST calculator above.
If your annual turnover rate is below $75,000 you will not be penalised for not registering for GST.
However, if your business has an annual turnover rate above $75,000, you will be penalised if you do not register. You will be required to pay 1/11th of all sales made from the date your turnover hit the threshold, plus interest.
To calculate how much GST you may be required to pay, use our GST calculator above.
Once you have registered for GST you will need to:
- Calculate the GST you need to charge on your products and services. Use the GST calculator above for assistance.
- Lodge your BAS quarterly or monthly.
- Update your invoices to ensure that GST is included on them.
- Keep receipts and tax invoices in order to claim GST Credits on your business purchases.
Even if your turnover is under the $75,000 threshold, if you work the numbers, your calculations may show that you will be increasing your profit if you register for GST.
A GST registered business with a $60,000 GST turnover would have had to collect an extra $6,000 on top for GST purposes by charging an extra 10% for their services. The turnover would be $66,000, with $6,000 owed to the ATO.
If expenses were $40,000 (GST inclusive), the business would have paid $3,636 of those expenses in GST ($40,000 divided by 11). The business would owe the ATO only $2,364 in GST (the $6,000 GST on turnover, minus the $3,636 GST credits on expenses).
The taxable profit would then be $23,636 ($66,000 turnover, minus $40,000 expenses and minus $2,364 owed to ATO). The business will have to pay tax on the profit at 30% (just for example purposes), totalling $7,090.80, which gives the business a net operating profit of $16,545.20 ($23,636 taxable profit, minus the $7,090.80 payable tax to the ATO).
On the other hand, if the business had not registered for GST, their taxable profit would be $20,000 ($60,000 turnover, minus $40,000 expenses), for which they would have paid $6,000 of tax on it ($20,000 taxable profit at the 30% tax example). The business would have saved $1,090.80 in tax payable to the ATO on their profit ($7,090.80 if GST registered against $6,000 not GST registered). However, their net profit would have only been $14,000 ($20,000 profit minus the $6,000 tax on the profit), meaning that, by not registering for GST, they would have effectively missed out on $2,545.20 of extra net operating profit.