GST – When & Why to Register

The GST or Goods and Services Tax is something which is important to get right. Getting it wrong is costly, and lack of knowledge on behalf of the Business Owner doesn’t cut it at the Tax Office. Currently, GST is a tax of 10% which is applied to most Goods and Services in Australia. Although recently there has been talk that the GST may increase from 10% to 15% as Prime Minister Malcolm Turnbull has confirmed a GST increase is in his sights as the government prepares its tax reform package.

Currently, it’s mandatory to register for GST if you expect your annual turnover to be $75,000 or more in Sales (not Profit). If you haven’t registered for GST, and you become aware that your GST turnover will exceed the $75 000 per year threshold, you will have to register for GST within 21 days. It’s a good idea to check each month to ensure you’re not likely to pass the threshold. If you don’t you could be liable for 1/11th of your income (plus penalties) if you are audited.

You must register for GST if:

  • your business has a gross income (also known as ‘GST turnover’) of $75 000 per year or more
  • your non-profit organisation has a turnover of $150 000 per year or more
  • you provide taxi travel for passengers in exchange for a fare. This rule applies to both taxi owner drivers and people who just rent a taxi.

However if your turnover will be less than this, registering for GST is optional, and you should consider the implications of your decision.

Reasons TO register earlier might be –

  • First and foremost, it’s a mindset trigger. If you want to grow your Business fast or carry through with the right mindsets, then registering for GST can be a sub-conscious trigger for getting you where you want to go.
  • In the early stages of business there is usually a lot of money going out the door and if you are dealing with other GST registered businesses you could reduce your expenses by 10% simply by registering for GST.
  • It looks more professional if you are registered for GST as otherwise you may seem too small for a potential purchaser to deal with.
  • If your competitors are registered for GST it will make it easier for customers to compare pricing if they are comparing apples with apples.
  • If you are in the fresh food industry or health sector or other GST free area so you don’t charge GST but you can claim GST back on things such as rent, petrol which means you are effectively just reducing your costs by 10%
  • It also means you are ready for growth. Having systems and processes set up from the earliest possible stage, can ensure you can move from Small to Medium to large Business with little fuss.

Reasons NOT to register for GST earlier might be –

  • If you deal with mostly end consumers who pay the brunt of the GST so you can be more competitive if you don’t charge GST as you can keep your price down e.g. cleaners
  • If you sell your time and have very little purchases you can be more competitive with your pricing
  • The cost of compliance may outweigh any benefits

Getting GST right is essential for tax compliance and for strategy in terms of planning and decisions in regard to pricing within your business. Remember, sometimes being required to maintain your financial records in a timely manner can provide valuable insight that may assist in the management of your business, so the admin involved in completing your business activity statement (BAS) may be a blessing in disguise.

If you would like a Complimentary GST Review, simply email our team at sally@balancebooks.com.au.

Author:
Sally Hams

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Email: accounts@balancebooks.com.au

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