Starting a business in Australia means understanding Goods and Services Tax (GST) – a 10% consumption tax on most goods and services. Knowing when and how to register for GST is important to ensure you stay compliant with Australian Taxation Office (ATO) rules. Here’s what you need to know about GST registration:
What is GST?
GST is a 10% tax added to most goods and services sold or consumed in Australia. If your business is GST-registered, you’ll need to add this 10% to the sale price of your good or service. Registered businesses can also claim credits (GST credits) for the GST paid on their own business purchases e.g. they can claim a credit for the GST on the rent paid for an office – but not on their private purchases e.g. they cannot claim back the GST they pay on a toy for their child
Do You Need to Register for GST?
In Australia, you must register for GST if any of these apply:
- Your turnover (gross income) is $75,000 or more in a year.
- You’re a non-profit organization with turnover over $150,000 in a year.
- You offer taxi or ride-sourcing services (such as Uber), regardless of turnover.
- You wish to claim fuel tax credits for your business.
If your turnover is below these limits, you can choose to register voluntarily. The benefit of registering voluntarily is that this may allow you to claim GST credits on your business expenses, the downside being that you’ll need to charge GST on all your sales.
Preparing to Register: What You Need
Before registering, make sure you have these essential details:
- Australian Business Number (ABN): You must have an ABN to register for GST. If you don’t already have one, apply through the Australian Business Register (ABR) website or ask your business accountant to do so for you.
- Personal Identification: If you’re an individual or sole trader applying, have your tax file number (TFN) and date of birth handy when applying for an ABN.
- Business Structure: You will need to advise whether your business is a sole trader, partnership, company or trust when applying for an ABN. We often find that clients have trouble applying for an ABN if they operate through a company or trust. If this is you, please do not hesitate to reach out to your friendly Nobel Thomas accountant for assistance.
- Turnover Estimate: You’ll need to provide an estimate of your annual turnover when applying for an ABN.
- Contact Information and Address: Provide accurate contact details and a business address to ensure you receive ATO notifications.
How to Register for GST
Once your information is ready, there are three ways to register:
- Online through the Australian Business Register (ABR) website: This is the fastest option, especially if you have a myGovID which provides you with secure access.
- By phone: You can call the ATO directly to register, although wait times may vary during peak periods (can be hours!).
- Through a registered accountant: A business accountant, such as Nobel Thomas, can manage the GST registration for you, ideal if you’re new to the process or need some guidance.
After You Register
Once registered, the ATO will confirm your GST status. Here’s what you can expect:
- Collecting GST: You’ll need to add 10% GST to the price of the good or service that you are selling. The GST will need to be shown on your invoices.
- Lodging BAS: You’re required to submit Business Activity Statements (BAS) usually quarterly or monthly to report and pay GST collected from sales to the ATO.
- Claiming GST Credits: As a registered business, you can claim back GST on business expenses. Keep detailed receipts and records to support these claims.
Please consult with your business accountant, such as Nobel Thomas, who will be able to help you with correctly lodging BASs, paying GST and claiming back eligible GST credits.
Managing Your GST Obligations
Once registered, it’s essential to stay on top of GST reporting. Here are a few tips:
- Use Accounting Software: Track income, expenses, and GST collected using reliable software. This will simplify BAS reporting and help you claim GST credits accurately. While Xero is far and away the most popular software for small businesses, other software such as MYOB and Quickbooks will also be sufficient for your business.
- Understand GST-Free Sales: Some goods and services, like certain foods and medical services, may be GST-free. Please contact your business accountant, such as Nobel Thomas, to provide a list of the GST free categories.
- Stay Organized: Keep detailed records of all sales and purchases to ensure you remain compliant and to make the BAS process is smooth and less costly for you (smooth normally means lower accounting fees!).
What if You Miss the GST Threshold?
If your turnover is below the $75,000 threshold, voluntary GST registration can still offer advantages. For example, you can claim GST credits on expenses. However, you’ll also have the added responsibility of collecting and reporting GST on your sales. Best to speak to your business accountant to determine whether best to voluntarily register or not.
Benefits of Voluntary Registration
If your turnover is below the $75,000 threshold, voluntary GST registration can still offer advantages. For example, you can claim GST credits on expenses. However, you’ll also have the added responsibility of collecting and reporting GST on your sales. Best to speak to your business accountant to determine whether best to voluntarily register or not.
Registering for GST is an essential step for most Australian businesses. Knowing when you need to register, how to handle the process, and what’s involved in managing GST obligations can save you time, money, and potential stress down the road. For business owners who find the GST requirements complex, consulting a tax or business accountant can help smooth the process. Please contact your friendly Nobel Thomas accountant if you have any questions.
