The Goods and Services Tax (GST) is a flat, 10% tax on almost everything Australians buy, use or consume. It sounds simple but there are a few exceptions and allowances written into the rules surrounding the GST that mean it’s not quite so straight forward. Many people going into business for the first time have questions regarding the GST so if you’re confused, you’re not alone. Here are some of the most common questions business owners ask.
Do I need to register for GST?
You must register if:
- Your business has turnover (gross income) of $75,000 or more per year.
- Your non-profit organisation has a turnover of $150,000 per year.
- You provide taxi travel for passengers in exchange for a fare (this applies to both owner drivers and people who are just drivers for taxi owners).
There may be instances where you want to register for GST, even if you don’t meet the above requirements. For instance, if your business has a lot of inputs which have GST included, you may want to register so that you can claim GST credits (these are explained below). On the other hand, if your business is based on providing a service with minimal expenses and capital purchases, it may not be worth the hassle of additional administration work and potential impact on your cashflow to bother with registering. It pays to get professional advice to see which option is right for your situation.
How do I register?
It’s a good idea to keep an eye on your business turnover as you have to register for GST within 21 days of exceeding the $75,000 limit. You’ll need an Australian Business Number (ABN) to register and this will become your GST registration number. If you don’t already have one, you can register for both your ABN and the GST at the same time at the Australian Business Register, where you can also register for a Tax File Number (TFN), pay-as-you-go (PAYG) withholding as well as your business name.
What are GST credits?
If you are registered for GST, you can claim back the tax paid when purchasing items for your business. If your GST credits are higher than the amount of GST you have to pay, you may be entitled to a refund. This is why it sometimes pays to register for GST, even if your business doesn’t meet the other requirements.
What is BAS?
Your Business Activity Statement, or BAS, is used to record all of the GST information. You will need to report on and pay any GST on your sales, and claim credits for any GST included in your business related purchases. If your turnover is more than $20 million, you must submit your BAS monthly, no later than 21 days after the end of each month. Otherwise, your BAS is submitted quarterly by the 28th day of the month following the end of each quarter. If your turnover is less than $20 million, you can choose to report monthly if this suits your cashflow better.
What needs to be shown on an invoice?
Invoices need to show specific information. Sales of $1,000 or more need to clearly display the words “tax invoice”, the seller’s name and ABN, the date and the buyer’s name and address or ABN. It also needs to show the items sold and how many, and the GST amount or state that GST is included in the total. For amounts less than $1,000, the invoice needs to include all of the above without the buyer’s details, however, if you set up your invoices to include all the relevant information, you’re covered for any eventualities. There are some things which are exempt from GST and these need to be clearly noted on the invoice along with the GST amount for the taxable items. Every business registered for GST needs to issue a tax invoice when asked, or for any taxable sale above $82.50.
These are just some of the more commonly asked questions but you may have many more. As always, seek professional advice to see what’s the best solution for your situation.