Should I register for GST?
Running a business is no easy feat, and when you add tax requirements into the mix, things can get even more complicated.
One such tax requirement in Australia is the Goods and Services Tax (GST).
As a consumption tax that applies to most goods and services sold in the country, businesses with an annual turnover of more than $75,000 must register for GST with the Australian Taxation Office (ATO).
But what does GST registration mean for you as a sole trader or company, and is it worth it?
Let’s explore the pros and cons of registering for Goods and Services Tax in Australia, and give you an inside look at what it means for your business’s bottom line.
From potential tax savings to administrative headaches, we’ll cover it all so you can make an informed decision about whether GST registration is right for your business.
So let’s dive into the world of GST and see what it means for your business in Australia.
What is GST?
If you’re new to business in Australia or want to know more details about GST read our blog first – What is GST?
If you’ve got your head around GST but want to know whether you should register, continue reading…
Are you required to register for GST?
Before you even consider whether you should register for GST, you need to check if your business is required to.
In Australia, all businesses with an annual GST turnover of more than $75,000 must register for GST with the Australian Taxation Office (ATO).
However, some businesses with a turnover below this threshold may register voluntarily for GST.
Is it better to be registered for GST?
What are the pros of registering for GST?
Registering for Goods and Services Tax has several advantages to help businesses improve their cash flow, enhance their reputation, and access new opportunities.
Let’s look at some of the main pros of GST registration:
Claiming input tax credits
You can claim GST credits you pay on business expenses, such as supplies and equipment, through input tax credits. This can help reduce the overall GST liability to the ATO and improve cash flow.
Increased perceived professionalism
Registering for GST can have a perceived professionalism in the eyes of clients, customers, and suppliers. This can give your business a competitive edge and help you win business.
Ability to charge GST on sales
Once registered, your business must charge GST on all taxable sales, which can help to offset the GST paid on business expenses (remember, you must use a tax invoice if charging GST).
Access to government contracts
Some government contracts require businesses to register for GST, and can expand your opportunities for bidding on government contracts.
What are the cons of registering for GST?
As we’ve just read, registering for GST can have its benefits, but it can also come with several potential drawbacks.
Here are some of the main disadvantages of GST registration –
Increased administrative burden
Your business must comply with additional reporting requirements, such as preparing and lodging BAS statements, keeping records, and maintaining accurate accounting records.
Negative cash flow
While your business can claim GST credits paid on business expenses, you must pay GST on taxable sales. This can result in negative cash flow if the business does not have sufficient funds to cover the GST payments.
The GST system can be complex, and your business needs to understand the rules and regulations to ensure compliance. This can be particularly challenging for small businesses with limited resources.
Some customers may view businesses that charge GST as more expensive, which can impact sales and reputation.
We recommend you weigh the pros and cons to determine whether GST registration is the right choice for your business.
Is it worth it to register for GST?
So, to answer your question, each business should weigh the pros and cons to see which would benefit them the most.
Sleek’s tips for deciding to register for GST
Still a little confused about whether you should register your business for GST?
That’s OK, this can be a big decision for any business.
Here are some tips to consider when making this decision –
Understand your turnover.
If your business has an annual GST turnover of more than $75,000, it must register for GST.
However, if your GST turnover is below this threshold, you may still choose to register voluntarily. Your business financial situation and projected growth will determine whether GST registration is necessary.
Weigh the pros and cons.
Read through the advantages and disadvantages of GST-registered businesses above, such as the ability to claim GST credits, increased perceived professionalism, administrative burden, negative cash flow, and complexity.
Assess your customer base.
Consider your customer base and whether they are likely to be impacted by GST charges. If your customers are primarily consumers rather than businesses, they may be more sensitive to price increases caused by GST charges.
Seek professional advice.
If you are unsure whether to register for GST, your accountant can provide guidance based on your circumstances.
Plan for compliance.
If you decide to register for GST, ensure that you are prepared to comply with the reporting quarterly business activity statements and maintain accurate accounting records. Put in plans such as implementing accounting software or hiring a bookkeeper to help manage the administrative burden – and so you claim GST credits.
Monitor your turnover.
If your business turnover exceeds $75,000 during the financial year, you must register for GST within 21 days of exceeding the threshold. Monitor your turnover throughout the year to ensure compliance with GST regulations.
Consider these factors and seek advice, to make an informed decision about whether to register for GST in Australia and take the necessary steps to ensure compliance with GST regulations.
Sleek can help whichever way you decide to go.
Use our chatbox to ask a quick GST question or schedule an appointment with a Sleek accountant to discuss whether you should register for GST in more detail.