This is one of the multitude of questions you need to consider and answer when starting up and registering a new small business. Knowing your obligations and ensuring that you are compliant can be daunting so below is a brief overview.
Disclaimer: below is only meant for general information. Please feel free to contact us for advice and guidance on your specific circumstances.
What is GST?
GST stands for ‘goods and services tax’, which simply put is a 10% tax on most goods and services sold in Australia.
There are a few goods and services deemed by the ATO to be ‘GST free’. A comprehensive list can be found on the ATO website.
Do I need to register and when?
There are 2 circumstances where you are required to register for GST:
- Threshold: > $75,000 turnover/gross income
You must register for GST if your turnover or gross income in a tax year exceeds $75,000. You need to register within 21 days of reaching the threshold. Once registered, you must include the GST portion on all your sales invoices.
- Rideshare & Taxi Drivers
Any drivers that provide travel for passengers, for example taxi, uber, ola, didi must register for GST regardless of their turnover/gross income.
If you do not meet the above criteria, you can still voluntarily register for GST. There are several circumstances where this can be beneficial for your business.
If you don’t register for GST and are required to then you may still have to pay the GST portion on any income earned from the date you were required to registered. This will apply whether or not you included GST in your prices or not. The ATO may also impose other penalties or interest.
Accounting for GST
Once you are registered, you must start to charge your customers the 10% GST. Things to keep mind when doing this:
- Label your invoice “Tax Invoice”
- ABN and your details
- Brief description of the items sold/service provided
- Include the GST as a separate line or note that the final figure “includes GST”
You can also claim GST credits for any GST paid by you to other GST registered businesses. Not all purchases/expenses will have GST so check your receipts and invoices.
You report all GST collected and any GST credits to the ATO via a BAS (Business Activity Statement). This is prepared and lodged monthly, quarterly, or annually. The frequency of your BAS returns is determined when you initially register for GST.
Your BAS also needs to be lodged in time to avoid any penalties.
Please feel free to get in touch with us if we can help you with determining if you need to register, walk you through the process, help you in recording the GST on all sales and expenses and prepare/lodge your BAS returns.
Heena Kalyan (Senior Bookkeeper)
AveSol Accounting Tax