Being a business owner is not an easy task, right?
No matter at what stage you are in now, creating your business plan, choosing the name, or already a few steps into the building process, this is one question you would most likely have in your mind.
What is GST? Well, maybe not that one, ok, but what about “Do I have to pay GST?” or “If I’m not earning any money for the first few months, do I still need to register for GST?”
The answer is: it depends.
We know it’s not the best answer of all time, so let’s get into it.
First things first:
What is GST
GST is the Australian Goods and Services Tax.
How much is GST
It is a 10% added value on most goods and services. Yes, on most of them. Getting a bit tricky here now.
So there are a few exceptions, you can check the list here.
If your goods and/or services are not on that list, keep reading, the following is interesting.
Do I have to pay GST?
You may be thinking that everyone that has a business should be paying this tax, right?
Well, yes, but there are certain rules as to who must and who should.
If your business matches one of the parameters below, you must be registered for GST:
- Your business has an annual turnover of $75,000 or more
- Your business is a not-for-profit organisation, and the annual turnover is >$150,000
- You want to claim fuel tax credits (this is a % rebate of your fuel expenses, check here for the rates)
- You provide any riding services – taxi, Uber, GoCatch, Didi, Ola, limousine travel
Now, what about if your business is under the threshold?
Good news! You don’t have to register for GST, but you can actually choose to do so.
There are some pros and cons:
Pros of registering for GST:
- Don’t pay GST on any business expense
- Some extra cash flow before making the
payment, normally quarterly*
- You’ll look big – if you don’t charge GST to your clients, you might be seen as a small operator
Cons of registering for GST:
PRO-TIP: be mindful of payment dates – a month after every quarter finish – and create a separate bank account to have the amount required prepared, so you don’t get caught. Better safe than sorry!
How is it calculated
As we mentioned previously, GST is 10% of the payable value.
Whenever you generate an invoice, all you have to do after collating the total sum is add 10% of that total to it.
There are 2 ways to work out GST, the long way, or the shortcut:
Long way to work out GST -> 10% of the total amount: (250×10)/100=25 -> 250+25= 275 where 275 is the invoice total
Shortcut way to work out GST -> Multiply the total amount by 1.1: 250×1.1=275
If you need some extra help, see here a useful GST calculator from moneysmart.gov.au
When you have an invoice, and you want to know how much GST has been charged, simply divide the total amount by 11:
275/11=25 where $25 would be what you can claim back.
How to register for GST
First, you need your ABN, which it’ll also become your GST registration number.
You could do so via the ATO website and go through all the steps online, via phone with an ATO agent or just talk to us, we can certainly help!
PRO-TIP: Be aware that there are different payment timeframes.
- Monthly, if your turnover is $20 million or more p.a.
- Quarterly, if your turnover is less than $20 million
- Annually, if you are voluntarily registered for GST. Only for businesses with a turnover of <$75,000 p.a. ($150,000 for not-for-profit organisations).
Types of GST registration
(just for non-residents)
We are not trying to make things difficult, but this is actually a thing. There are different types of GST registration but no need to feel overwhelmed.
Are you an Australian permanent resident or citizen? Don’t worry, this section is not for you.
If not, please keep reading.
You have 3 types of registration, see differences below:
Simplified GST registration:
- No need for an ABN
- Make sales connected with Australia which are: imported services, digital products or low value imported goods
- Want to register, report and pay electronically
- No need to claim GST credits (including credits for taxable importations)
Standard GST registration
- Don’t have or need an ABN
- Make sales connected with Australia
- Need to issue tax invoices
- Want to claim GST credits
Standard GST - only registration
- Not entitled to an ABN
- Don’t make sales connected with Australia
- Want to claim GST credits
This is a lot of information to process, we understand. Hopefully, by now, you have a better comprehension of what GST is, and that we’ve solved a few of your main questions.
Read here more business-related articles, we keep publishing and updating all the information regularly.
1 Source: https://www.ato.gov.au/Business/International-tax-for-business/Non-resident-businessesand-GST/