GST (Goods and services tax ) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
How does the GST work
Generally, businesses and other organizations registered for the Goods and Services Tax will:
- include GST in the price they charge for their goods and services
- claim credits for the GST included in the price of goods and services they buy for their business.
You must register for the Goods and Services Tax if:
- your business or enterprise has a GST turnover (gross income minus GST) of $75 000 or more
- your non-profit organisation has a Goods and Services Tax turnover of $150 000 per year or more
- you provide taxi or limousine travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover – this applies to both owner drivers and if you lease or rent a taxi
- you want to claim fuel tax credits for your business or enterprise.
If your business or enterprise doesn’t fit into one of the above categories, registering for GST is optional. However, if you choose to register, you generally must stay registered for at least 12 months.
When do you need to register?
You can register for the Goods and Services Tax when you first register your business or at any later time.
If you’ve just started a new business and expect it to reach the Goods and Services Tax turnover threshold or more in its first year of operation, you should register for GST.
If you’re not registered for the Goods and Services Tax, check each month to see whether you’ve reached the threshold, or are likely to exceed it. If your turnover exceeds the relevant threshold, you must register within 21 days of reaching it.
You only register once for the Goods and Services Tax, even if you operate more than one business.
If you do not register for GST and you are required to do so, you may have to pay GST on the sales you have made since the date you became required to register – even if you did not include GST in the price of those sales. You may also have to pay penalties and interest.
When to charge GST
If you are registered for GST – or required to be – the goods and services you sell in Australia are generally taxable unless they are GST-free or input-taxed.
To be a taxable sale (that is, a sale that has GST in the price), a sale must be:
- for payment of some kind
- made in the course of operating your business
- connected with Australia.
You pay GST on the taxable sales you make when you lodge your activity statement. For these taxable sales, you:
- include GST in the price
- issue a tax invoice to the buyer
- pay the GST you’ve collected when you lodge your activity statement.
You can claim credits for the GST included in the price of purchases you needed to make your taxable sales.
What you need to do for GST
If you run a business or other enterprise and have a GST turnover of $75,000 or more ($150,000 or more for non-profit organisations) or you provide taxi travel – you need to:
- register for GST
- work out whether your sales are taxable (that is, subject to GST, and not exempted because they are GST-free or input-taxed) and include GST in the price of your taxable sales
- issue tax invoices for your taxable sales and obtain tax invoices for your business purchases
- claim GST credits for GST included in the price of your business purchases
- account for GST on either a cash or non-cash basis and put aside the GST you have collected so you can pay it to us when due
- lodge activity statements or annual returns to report your sales and purchases, and pay GST to us or receive a GST refund.
If your business changes or ceases
You must cancel your Goods and Services Tax registration if you close or sell your business.
You may need to cancel your Goods and Services Tax registration if your business structure changes (such as from a partnership to a company).
Your ABN is cancelled when you cancel your Goods and Services Tax registration (unless you are withdrawing from the GST system because your turnover is below the threshold for compulsory registration).
You cannot continue to operate on a GST- registered basis after the date you cancel your GST registration.
To find our more or if you have any questions call Taxwise on (08) 9248 8124. If you like this article you may also want to read about Record Keeping for your Business.