How To Register for GST in Australia: A Step-By-Step Guide

Businesses required to register for GST

So, who needs to register for GST?

Generally speaking, if your business has a GST turnover of $75,000 or more per year (or $150,000 for non-profit organizations), you must register for GST.

This means that if your gross income from all taxable supplies exceeds this threshold, GST registration is mandatory. Even if you don’t meet this threshold, you may still choose to register voluntarily – more on that later.

GST turnover threshold

The GST turnover threshold is a crucial concept to grasp. Your GST turnover is your gross business income (not your profit), excluding any GST you’ve included in sales to your customers.

If your turnover meets or exceeds the $75,000 threshold, you must register for GST within 21 days of reaching this milestone. It’s essential to monitor your turnover regularly and be aware of your GST liability to avoid any penalties or interest charges.

How to register for GST in Australia

Now that you know whether you need to register for GST let’s dive into the process of actually registering. Fortunately, the registration process is relatively straightforward. It can be completed online through the ATO’s Business Portal. Here’s what you’ll need to do:

Obtaining an Australian Business Number (ABN)

Before you can register for GST, you’ll need to have an Australian Business Number (ABN). If you don’t already have an ABN, you can apply for one online through the Australian Business Register. This process is free and usually takes less than 15 minutes to complete. Once you have your ABN, you’re ready to move on to the next step.

Registering for GST online

With your ABN in hand, you can now register for GST online through the ATO’s Business Portal. Simply log in to the portal and follow the prompts to complete your GST registration. The whole process can be completed in just a few minutes, and you’ll receive confirmation of your registration via email.

Information needed for GST registration

When registering for GST, you’ll need to provide some basic information about your business, including:

• Business name
• Contact details
• Date you want the GST registration to start
• Banking details

The only reason they ask for your bank account details is so that the ATO can process any GST refunds you may be entitled to. Once you’ve provided all the necessary information, simply submit your application and wait for confirmation from the ATO.

GST concessions and exemptions for certain businesses

While most businesses will need to register for GST once they reach the turnover threshold, there are some concessions and exemptions available for certain types of businesses.

These concessions can help to reduce the administrative burden of GST compliance and may even provide some financial benefits.

GST concessions for non-profit organisations

If you run a non-profit organization, you may be eligible for GST concessions. These concessions can include a higher GST turnover threshold of $150,000 per year, as well as the ability to claim GST credits on certain purchases.

To be eligible for these concessions, your organization must be registered with the Australian Charities and Not-for-profits Commission (ACNC) and meet certain other criteria.

GST exemptions for small businesses

If your business has a GST turnover of less than $75,000 per year, you may be eligible for GST exemptions.

This means that you don’t have to register for GST, charge GST on your sales, or claim GST credits on your purchases. However, you can still choose to register for GST voluntarily if you wish.

This can be a good option if you regularly deal with other businesses that are registered for GST, as it allows you to claim credits on your purchases.

It’s important to note that even if you’re exempt from GST, you still need to keep accurate records of your income and expenses. This will help you to monitor your turnover and ensure that you’re meeting your tax obligations.

If you’re a Sleek customer, we’ll provide you with free bookkeeping, invoicing, and expense management tools to help you stay on top of these records.

Claiming GST credits on business purchases

One of the benefits of registering for GST is that you can claim credits for the GST you pay on business purchases. This can help to offset the GST you charge on your sales and reduce your overall tax liability.

But what exactly are GST credits, and how do you claim them?

What are GST credits?

GST credits, also known as input tax credits, are the GST that you pay on business purchases. When you buy goods or services for your business, the price you pay will usually include GST. As a registered business, you can claim back the GST component of these purchases as a credit on your BAS.

For example, let’s say you purchase a new computer for your business that costs $1,100 including GST. The GST component of this purchase is $100 (1/11th of the total price). When you lodge your BAS, you can claim this $100 as a GST credit, reducing the amount of GST you need to pay to the ATO.

Eligible purchases for claiming GST credits

Most business purchases will be eligible for GST credits, as long as they include GST in the price. This can include things like:

• Office supplies and equipment.
• Business vehicles and fuel.
• Rent and utilities for your business premises.
• Professional services (e.g. accounting, legal fees).

However, there are some purchases that are not eligible for GST credits, even if they include GST in the price. These can include things like:

• Entertainment expenses
• Penalties and fines
  Personal or domestic purchases

It’s important to keep accurate records of all your business purchases and ensure that you only claim GST credits on eligible expenses.

Record-keeping requirements for GST credits

To claim GST credits on your BAS, you’ll need to keep accurate records of all your business purchases. This includes tax invoices for any purchases over $82.50 (including GST).

These invoices must include certain information, such as the supplier’s ABN, the amount of GST paid, and a description of the goods or services purchased. You’ll need to keep these records for at least 5 years after the due date for lodging your BAS.

This is a legal requirement and will help you to substantiate your GST claims if you’re ever audited by the ATO.

Accounting for GST in your business

Once you’re registered for GST, you’ll need to start accounting for it in your business. This means including GST in your prices, issuing tax invoices to your customers, and keeping accurate records of your sales and purchases. But how do you actually account for GST in practice?

Cash vs. accrual accounting for GST

There are two main methods for accounting for GST: cash and accrual. Under the cash method, you account for GST when you actually receive payment from your customers or make payment to your suppliers.

Under the accrual method, you account for GST when you issue an invoice or receive an invoice, regardless of when payment is actually made. Most businesses will use the accrual method for GST accounting, as it provides a more accurate picture of your financial position. However, some small businesses may be eligible to use the cash method if they meet certain criteria.

Preparing and lodging Business Activity Statements (BAS)

Once you’re registered for GST, you’ll need to start lodging Business Activity Statements (BAS) with the ATO. Your BAS is used to report your sales and purchases for each tax period (usually quarterly) and calculate the amount of GST you need to pay or claim as a credit.

To prepare your BAS, you’ll need to keep accurate records of all your sales and purchases for the period, including any GST charged or paid. You’ll then use this information to complete your BAS online through the ATO’s Business Portal or with the help of a registered tax agent or BAS agent.

It’s important to lodge your BAS on time to avoid any penalties or interest charges.  You’ll generally have until the 28th day of the month following the end of each quarter to lodge and pay your BAS.

GST accounting software

To make GST accounting easier, many businesses use specialized accounting software that includes GST functionality. This can help you to automatically calculate GST on your sales and purchases, generate tax invoices, and prepare your BAS.

There are many different GST accounting software options available, ranging from simple spreadsheet templates to fully-featured cloud accounting systems. Some popular options include Xero, MYOB, and QuickBooks.

When choosing GST accounting software for your business, consider factors such as ease of use, cost, and integration with other business systems. It’s also a good idea to get advice from your accountant or bookkeeper on which software is best suited to your needs.

Common GST mistakes to avoid

GST can be a complex area of business taxation, and it’s easy to make mistakes if you’re not careful. Here are some of the most common GST mistakes to watch out for:

Failing to include GST in prices

One of the most common GST mistakes is failing to include GST in your prices. If you’re registered for GST, you must include GST in the prices you charge your customers.

This means adding 10% to your base price and displaying the total price as “including GST”.

For example, if your base price for a product is $100, you would need to charge $110 including GST. If you fail to include GST in your prices, you’ll end up paying the GST out of your own pocket and reducing your profit margins.

Claiming GST credits incorrectly

Another common mistake is claiming GST credits incorrectly on your BAS. This can happen if you claim credits for purchases that are not eligible for GST credits (such as entertainment expenses) or if you claim credits twice for the same purchase.

To avoid this mistake, make sure you only claim GST credits for eligible purchases and keep accurate records of all your expenses. If you’re unsure whether a purchase is eligible for GST credits, check with your accountant or the ATO.

Not keeping accurate records

Keeping accurate records is crucial for GST compliance. You need to keep tax invoices and other records of all your sales and purchases for at least 5 years after the due date for lodging your BAS.

If you don’t keep accurate records, you may end up claiming GST credits incorrectly or underreporting your sales on your BAS. This can lead to penalties and interest charges from the ATO, as well as damage to your business reputation.

To avoid this, make sure you have a good record-keeping system in place and regularly reconcile your accounts to ensure accuracy.

Pro Tip: Consider using GST accounting software to automate your record-keeping and reduce the risk of errors.

GST and imported goods

If you import goods into Australia, you need to be aware of how GST applies to these transactions. In general, GST is payable on most goods imported into Australia, but there are some exceptions and special rules to be aware of.

GST on imported goods

If you import goods into Australia and the value of the goods is over $1,000 AUD, you will generally need to pay GST on the imported goods. The GST is calculated based on the value of the goods, plus any customs duty, transport, and insurance costs.

If you’re registered for GST, you can claim a credit for the GST paid on the imported goods when you lodge your BAS. However, if you’re not registered for GST, you will not be able to claim a credit and the GST will be an additional cost to your business.

GST-free imports

Some goods are exempt from GST when imported into Australia. These include:

• Certain food items
• Medical aids and appliances
• Precious metals
• Certain educational materials

If you’re importing GST-free goods, you will not need to pay GST on the import, but you may still need to pay customs duty and other taxes.

Calculating GST on imported goods

To calculate the GST payable on imported goods, you need to determine the value of the goods in Australian dollars. This includes the purchase price of the goods, plus any customs duty, transport, and insurance costs.

Once you have the total value of the goods, you can calculate the GST by multiplying the value by 1/11th (or 10%). For example, if the total value of the goods is $1,100 AUD, the GST payable would be $100 AUD.

It’s important to keep accurate records of all your imports and the GST paid, as you may need to provide this information to the ATO or claim credits on your BAS.

Seeking professional advice for GST registration and management

While registering for GST and managing your GST obligations can seem daunting, there is help available. Seeking professional advice from a qualified accountant or tax professional can help you navigate the complexities of GST and ensure that you’re meeting all your compliance obligations.

When to seek professional advice

There are several situations where it may be beneficial to seek professional advice for GST:

• When you’re first registering for GST and setting up your GST accounting systems
• When you’re unsure about how GST applies to a particular transaction or situation
• When you’re preparing your BAS and want to ensure accuracy and compliance
• When you’re considering changes to your business structure or operations that may impact your GST obligations

A qualified accountant or tax professional can provide guidance and support in all these situations, helping you to make informed decisions and stay on top of your GST obligations.