Goods and Service Tax (GST) Explained
GST is not a cost. Goods and service tax, often known as GST, is a tax of 10% on most goods and services sold or consumed in Australia. At some point in time it’s highly likely that your business will be affected by the tax.
The law says that you don’t need to register for GST until you turnover $75,000 in sales – not profit. By registering for GST it means you must charge GST on all your sales in Australia but is also means you can claim back the GST on any purchases you make that include GST.
However, GST is not charged on:
- Most basic food items
- Some education courses
- Some medical items
- Some childcare services
Do I Need To Register For GST?
You must register for GST if:
- Your business has a GST turnover of $75,000 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 taxi drivers, limousine drivers and ride sharing services like Uber
When Do I Need To Register?
If you aren’t registered for GST, and you become aware that you turnover will exceed the $75,000 per year threshold, you have 21 days to register.
Keeping an eye on your GST turnover is important. If your gross weekly sales are more than $1442.30 regularly, then it will be necessary to register.
Registering is optional if your turnover is below the $75,000 threshold. You can choose to register if your turnover is below the 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.
BAS Time
Quite simply, a Business Activity Statement takes the GST you charged in your services/sales (the GST you owe the ATO) minus the GST you paid on your business expenses (the GST the ATO owes you). If your claim for credit is greater than the GST amount you owe the ATO, you’re entitled to a refund. Using accounting software, you are able to collate and lodge a Business Activity Statement (BAS) relatively simply.
What Documentation Do I Need To Claim A GST Credit?
To claim a GST credit, you will need an invoice or receipt that includes:
- The words “Tax Invoice”
- The identity of the seller
- The seller’s ABN
- The invoice issue date
- A description of the items sold, quantity (if applicale) and the price paid
- The amount of GST
If you’re claiming GST credits and your invoice only shows the total with GST included, you can work out the GST by dividing the total by 11.
Your tax records must typically be kept in an accessible form (either printed or electronic) for five years, except where you have amended a tax return (including a BAS) – should this happen, the five year period is reset.
What Happens If I Don’t Register?
Penalties and intrest may apply, along with paying GST on the sales you made since the date you should have registered.
I Think I Should Have Registered. What Can I Do?
The ATO allows you to backdate your registration. Don’t put it off if you should’ve registered. Owning an honest mistake is better than running from one.
If you would like more information about whether or not you should register for GST please feel free to contact us.
