Between customers, marketing, tax and the other million things on your list, your GST obligations are often the last thing on your mind. But don’t stress! We are here to give you the rundown on when you should be registering for GST and why it is so important to get it right.
Goods and Services Tax (GST) is compulsory for any Australian business whose income exceeds $75,000 per annum, or which is expected to reach that level throughout the financial year. This refers to sales income, not profit. The timeframe on compulsory registration once you reached this sales level is extremely tight – only 21 days. Once you are registered, you must charge your clients/customers the 10% GST, which is then owed to the ATO.
If your sales income is less than $75,000 per annum and you do not expect to exceed this, then GST registration is optional. In this case, your invoices would reflect this by not showing any additional GST amounts on your products or services.
Through a monthly or quarterly Business Activity Statement (BAS), you are able to claim back the GST you have paid in the course of running your business, offset against the GST you have charged your clients. This means if you have spent more in GST than you have charged, you will receive a refund of the difference. If you have charged more than you have spent, then you will need to make a payment of the difference.
So, what happens if you have an amazing year, are not registered for GST and are so busy running your business that you don’t even realise you have reached this sales income target? Unfortunately, your GST registration will be backdated to the point in time when you were required to register. This means that 10% of all that hard-earned income during the time you SHOULD have been registered, is now considered GST payable and MUST be reported on your Business Activity Statement.
As you can see, getting it right in the first instance becomes extremely important as a business owner
The good news is you can opt to register early, when you are aware that you may exceed the $75,000 threshold for the upcoming financial year. This allows you to make the necessary invoice adjustments and charge your clients the additional compulsory 10% GST without risking your sales income.
Regular record keeping and an amazing accountant will help you to get it right the first time so you can identify when and why you need to be registering your small business for GST before it becomes a problem.
To check whether your business should be registered for GST, or for any other GST enquiries, please book an appointment with us.
At VBA we specialise in strategic tax advice, offering tax and financial reporting for individual income earners, family businesses, tradies and construction companies.
Victor Bimrose Accountancy Pty Ltd (ASIC No. 1259423) ABN 53 010 957 294 is a Corporate Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361.
Mark Foxley-Conolly (ASIC No. 1259421) is a Limited Authorised Representative of Merit Wealth Pty Ltd ABN 89 125 557 002, Australian Financial Services Licence Number 409361
General Advice Warning: This information has been prepared without taking into account your objectives, financial situation or needs. Because of this, you should, before acting on this information, consider its appropriateness, having regard to your objectives, financial situation or needs.