They say two things are certain in life, death and taxes. We certainly hope your small business lives a long and prosperous life and that you never fall foul of the taxman. In this guide, we will explain the GST and show you that it is not a tax you pay but instead one you help collect from the final consumer.
The Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in Australia. If you are registered for GST, you must add GST on all your applicable taxable sales unless they are GST-free or input-taxed. You are able to claim credits for GST included in the price of business purchases of goods and services.
WHY do I need to register?
If your business exceeds $75,000 turnover or provides taxi or ride-sharing services you must register and charge for GST! You need to register within 21 days of exceeding the turnover threshold.
WHAT are the steps to follow for Standard GST registration?
- Register for GST online, by phone or through a registered agent. Make sure you get an Australian Business Number (ABN) first. https://www.ato.gov.au/Business/GST/Registering-for-GST/
- Determine which of the goods and services you sell must include GST.
- Issue tax invoices when you sell something which GST is included you must issue an invoice clearly showing the 10% GST added. For example, $100 x 1.1 = $110 inc GST. Under Australian legislation, all goods and services pricing should be indicated as total price with GST included. For example, from the previous example, $110 inc GST, not $100 ex GST.
- GST credits for anything that you have bought for your business. Collect tax invoices that show GST has been paid . Link
Australian GST-free products and services
Most basic foods, some education courses and some medical, health and care products and services are exempt from GST.
Exports of goods and services from Australia are generally GST-free.
The supply of a service is GST-free if the recipient of the service is outside Australia.
- Your accounting system should clearly show how much GST you have collected and paid. (Be sure to read our essential guide on Accounting software as this will simplify the process). Ensure you put aside any GST money you have collected, as it must be paid to the tax office and it is not your business’s revenue. You will pay your GST collected minus your allowable credits to the ATO.
- Lodge a BAS statement. A Business Activity Statement (BAS) is your report to the ATO on your GST activity. You can lodge online through MyGov, the ATO Business Portal, directly through some accounting software, tax agent, or mail.
If your turnover is less than $20 million you must lodge quarterly otherwise monthly. More details can be found in our How to Complete a BAS guide.
The Australian tax office requires GST invoices to include certain information and this will differ based on the sale being below or above $1000. The above $1000 format can be used for the lesser value. The specific requirements and a suggested format can be found here https://www.ato.gov.au/business/gst/Tax-invoices/
|BAS due by Quarter||Due date|
|1. July, August, and September||28 October|
|2. October, November, and December||28 February|
|3. January, February, and March||28 April|
|4. April, May, and June||28 July|
- Keep good records
- Ensure your sales reconcile with your bank statements
- Keep all your tax invoice and GST records for 5 years
- GST is not claimable on private expenses such as entertainment and food
- All claims must be in Australian dollars
- When claiming a tax credit for less than $82.50 for you only need one of the following; a tax invoice, a cash register receipt, a receipt, or an invoice.
- You cannot make credit claims for invoices that do not include GST
- Further GST and BAS tips can be found on the ATO website
If you sell something that is GST exempt you can still claim credits for the GST included in the price of purchases you use to make your GST-free sales.
SUMMARY – GST do I have to pay it
In summary, GST will be part of your business, so ensure you keep accurate records and employ an appropriate person to help and/or use a software tool to ensure you stay compliant.