What is GST and do I need to register for GST?
Goods and services tax, often known as GST, is collected by registered businesses. GST is a tax on most goods and services sold or consumed in Australia.
If your business is registered for GST, you will have to collect some extra money (one-tenth of the sale price) from your customers and pay it to the Australian Taxation Office (ATO) when it is due.
The Goods and Services Tax (GST) is a broad-based tax of 10 per cent on the sale of most goods and services in Australia.
GST applies to most businesses across Australia and it's highly likely that your business will be affected by the tax.
Do I need to register for GST?
You must register for GST if:
- your business has a GST turnover of $75,000 or more
- your non-profit organisation has a turnover of $150,000 per year or more
- you provide taxi travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover. This rule applies to both taxi owner drivers and people who just rent a taxi.
As a business owner, it's your responsibility to register for GST if your turnover exceeds the $75,000 threshold or is likely to exceed it.
The ATO advises that if you've just started a new business and expect it to earn $75,000 or more in its first year of operation, you should register for GST.
GST turnover is your business's gross income, not your business' profit.
For example, if you run an online clothing store and you sell $80,000 worth of clothes, you'd have to register for GST because your GST turnover is over the $75,000 threshold. This rule still applies, even if you only get to keep $40,000, as GST turnover is different from profit.
If your business doesn't fit into one of the above categories, you don't have to register for GST.
When do I need to register?
If you haven't registered for GST, and you become aware that your GST turnover will exceed the $75,000 per year threshold, you will have to register for GST within 21 days.
It's a good idea to check each month to ensure you're not likely to go over the limit. Keeping an eye on your GST turnover is important so you can register if necessary.
If your GST turnover is below the $75,000, registering for GST is optional.
You may choose to register if your GST turnover is below the $75,000 threshold, however this means that once registered, regardless of your turnover, you must include GST in your fees and claim GST credits for your business purchases.
How do I register for GST?
You need an Australian Business Number (ABN) to register for GST, as the ABN is part of the GST system. Your ABN will also be your GST registration number.
Once you have registered for GST, you become entitled to claim input tax credits for the GST paid on items you've bought for business use. If you're not registered, you can't claim input tax credits.
What are GST credits?
GST credits are a potential amount of money your business might be able to claim from the ATO.
If you are registered for GST, you can claim back the GST that has been included in the purchase price of something you've bought for your business.
For example, Laura runs an accountancy firm and has just bought a new computer for the office. The computer cost Laura $1,100, including GST. Because GST is one-eleventh of the sale price, Laura would have paid $100 in GST.
Laura is registered for GST because her business's GST turnover is more than $75,000. She is able to claim GST credits for the GST included in the sale price of her computer ($100).
If at the end of the year her GST credits are higher than the amount of GST she has to pay the ATO, she will be able to get a refund.
What happens if I don't register for GST?
If your GST turnover is under $75,000 and you don't register for GST, you won't include GST in your fees. You also can't claim GST credits for your business purchases.
Small business GST concessions
If your business has an annual turnover of less that $2 million, you may be able to access the following GST concessions.
Accounting for GST on a cash basis
You can account for GST in the same tax period you receive payments from your customers and claim input tax credits for making payments to your suppliers.
Paying GST by instalments
You can pay GST by instalments each quarter based on what you or the Australian Tax Office (ATO) estimates your GST liability to be. You can vary this amount each quarter.
Annual apportionment of GST input tax credits
You can claim a full input tax credit for a business purchase that you intend to use partly for private purposes and make a single adjustment to account for the private use percentage at the end of your income year.
About the Australian Goods
and Services Tax (GST)
You will have to register for GST if:
- Your business has a GST turnover of over $75,000 a year ($150,000 if you are a non-profit organisation); or
- you provide Taxi travel in exchange for a fare as a part of your business (this includes ridesharing services like Uber, Didi, Ola or Taxify).
As the owner of a business, it will be your responsibility to ensure that it becomes GST registered if you realise its turnover is likely to exceed the $75,000 threshold.
If your annual turnover is lower than the $75,000 threshold, you can register for GST as well, but you will be required to begin charging GST. There are some instances where registering for GST when not required can bring some financial benefits (more on that on a question below).
You can find more information about the GST registration requirements by clicking here.
In order to register for GST online, all you need to do is fill out our simple one-page form, it will take you less than 2 minutes.
Once submitted, we will ensure all details are correct, process the order and confirm you have been properly registered with the ATO.
Best of all, you do not have to deal with anyone else. You will not need to worry about wasting time on the phone, meeting technical requirements and, more importantly, waiting for a registration confirmation. Our registration process is extremely fast and straightforward, with 95% of online registrations being completed within 4 business hours.
You will need an ABN to register for GST. GST is registered to the business' ABN. This allows you to potentially register one business while not registering another that you own (as long as the second business is under the $75,000 threshold).
You will have 21 days from the day you realised that your turnover will exceed the $75,000 threshold. It is important to check regularly just in case you exceed the threshold faster than expected. If you are earning under the $75,000 threshold you can still register, however, you must then include GST in your fees regardless of your turnover.
Registering for GST as a sole trader is the same as registering any other business type. You fill out our simple online GST registry form and we will handle the rest all with our usual same-day GST registration.
If you do not register, the ATO will require you to pay GST on sales made since the date you were required to register. This could happen even if you didn't include GST in the price of those sales. You may also be fined or have to pay interest on the excess amount.
If your turnover rate is below $75,000, you do not need to register and will not be penalised.
- 95% of registration submissions have their GST registration completed in 4 business hours. Don’t wait for your GST registration. Fill out the form on gstregister.com.au under online GST Registration. This form takes roughly 3 minutes and will be processed by professionals to make the process quick and easy.
- Once the application has been submitted and payment has been processed, you will receive an order confirmation email. In the following 24 business hours, you will receive a GST registration confirmation email, including a confirmation attachment from the ATO portal.
- An email notification is sent when the order has been received and another email once the registration has been completed, including a PDF attachment from the ATO portal.
- Your registration is handled by licenced ATO tax agents. We can provide support if you need help.
- As long as the start date of your registration is the same day or before it, you can claim GST credits for your registration (future-dated registrations are not eligible). You will receive a tax-inclusive receipt including the GST component.
GST credits (or input tax credits — which are credits for the tax included in the price of your business inputs) are credits you can claim for GST that has been part of the price of purchase for any goods and services you have bought for your business during a period.
To claim these GST credits, it is required that you are registered for GST, which will allow you to claim GST credits in your business activity statements.
A four-year time limit applies for claiming GST credits.
Once you are registered for GST, your bookkeeping and accounting will change. You will now have to do the following:
- Lodge BAS reports showing how much GST you have received and paid on either a monthly, quarterly or annual time period. We recommend an easy, simple option is to lodge online via BASLodge.com.au
- Calculate these amounts when they are due. This can be easy or difficult, depending on the complexity of your business.
- Update your invoices to have GST added on. We recommend using a great accounting software to help manage your invoices. We love www.xero.com.au check out below a quick video of their awesome invoice management system. (https://vimeo.com/92108384)
- Keep up to date with your lodgements and keep good records of your receipts. It is incredibly important to keep all receipts for your business, big or small. The ATO requires documents to be kept and maintained in case of an audit or review. Not having the appropriate documentation will lead to fines and penalties. One of our favourite record keeping tools is Receipt Bank check out their great app for keeping records together.
IF IN DOUBT, CALL A PROFESSIONAL
Professional bookkeepers help when lodging your BAS can be invaluable, and not overly expensive.
If you have any ideas or questions regarding how to register for GST Online, feel free to call our free helpline on 1800 546 526.
Even if your turnover is under the $75,000 threshold, if you work the numbers, you might 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.