GST Basics for Small Business – Should I register for GST ?

This is a question asked by small business owners everywhere, should I register for GST ?

In Australia, any one conducting a business with an ABN needs to register for GST (Goods & Services Tax) if their annual turnover is over $75,000. Under this, registration is voluntary.

Why would you volunteer for taxes????? Well, there are benefits and drawbacks that I will cover briefly here.

Firstly, registering for GST is fairly simple via the ATO Business Portal https://bp.ato.gov.au . Your tax agent can also do this for you, if you request, the fee should be minimal.

If you do register, a date for the start of registeration is provided, this can be backdated, generally to include the last quarterly period (Business Activity Statements – BAS are lodged monthly, quarterly or annually – more about this in a moment). Generally you can backdate your GST registration to when you started your business or when you got a bit more serious. I generally recommend the beginning of your Start Up, if recently, as you can claim the GST paid on set up expenses as the refund of GST paid helps in the lean Start up phase, when not a lot of income is around.

Good bit, you claim the GST on expenses, bad bit you need to lodge a BAS, as mentioned you can choose when frequency of lodgement – quarterly is most popular, as it keeps you fairly current, so the GST you owe or can claim is paid more often.

How GST works is that for most Goods and Services there is a tax added which belongs to the government. Examples below:

EXPENSES – Your business buys a GST item for $110.00 (GST inclusive) – you pay $100.00 for the item, which you can claim as a business expense and $10.00 in GST which you can claim in your BAS as a GST credit. The other thing to remember is the invoice needs to be from another registered GST business, so Officeworks is safe. With a smaller local supplier, you will need to check their invoice, which should act as a tax invoice, showing all of the correct details (details below).

SALES INCOME – Your Buinsess sells a GST item for $110.00 (GST inclusive) – Your cusotmer has paid $110.00 to you and you have earned $100.00 in business income and collected $10.00 in GST, which belongs to the government and you will need to pay back as a GST debit in the BAS.

Depending on the amounts of GST credits and GST debits each period is if you get a refund or make a payment to the ATO in your BAS. In the example above, if this was the all the transactions for the period there would be no BAS refund or payable as GST credits and GST debits are even.

Something to note, on your tax invoice, which you are legally required to provide within 28 days if a purchaser requests but also always for any taxable sale over $82.50 ($75.00 in income and $7.50 in GST).

There needs to be 7 items for it to be valid (for taxable sales under $1,000.00)

  1. The document needs to be labelled ‘Tax Invoice’
  2. The sellers’s identity – business name
  3. The sellers’s ABN
  4. Dated when issued to the purchaser
  5. A brief description of the items sold
  6. The price, the GST amount (if applicable) split up or together labelled ‘Total price includes GST’
  7. Each item on the tax invoice must be identified as a taxable or non taxable item, if more than one.

For invcoices over $1,000.00 the buyer’s identiy or ABN is also required.

THINGS TO AVOID & TIPS to stay on the ATO’s good side

  1. Do not charge GST if you are not registered – this is illegal and the ATO deals with it pretty harshly.
  2. Do not claim GST if you do not have a tax invoice, showing the details above.
  3. Try to always lodge you BAS on time, as this helps if you have a good record with the ATO if you need request extensions or payment plans during the business year. A pattern showing you are a responsible business owner is always helpful.
  4. You can get a list of BAS due dates from the ATO website – BAS & Tax agents get later due dates than individuals, so if you are struggling with time it may pay to contact someone professional to help you, this can be an affordable option.
  5. Small Business software like Xero, is incredibly helpful in simplifying your business finances and cost effective with not only preparing BAS, but capturing Annual Tax information, saving time and money at EOFY.
  6. Hopefully you all have access to a helpful BAS or tax agent that can help you with sticky questions or lodgement issues.

If you have any questions or comments please contact me.

Author Bridgett Fuller,

Director at Belle Accounting Co Pty Ltd

Bridgett@belleaccountingco.com

www.belleaccountingco.com

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