When starting your own business and invoicing customers, there can be a lot to think about. So, how do you know whether or not you need to register for GST? We have put together a quick guide to help you understand your obligations and when you need to register for GST.
Firstly, what is GST?
The Goods and Services Tax (GST) is a 10% tax on goods and services supplied or sold in Australia.
When am I required to register for GST?
The Australian Taxation Office (ATO) requires you to register for GST:
when your business or enterprise has a GST turnover (gross income minus GST) of $75,000 or more (see Working out your GST turnover).
when you start a new business and expect your turnover to reach the GST threshold (or more) in the first year of operation.
if you're already in business and have reached the GST threshold.
if your non-profit organisation has a GST turnover of $150,000 per year or more.
when you provide taxi or limousine travel for passengers (including ride-sourcing) regardless of your GST turnover – this applies to both owner drivers and if you lease or rent a taxi.
if you want to claim fuel tax credits for your business or enterprise.
If you do not meet any of the above requirements, registering for GST is optional. However, if you do opt to register for GST, you generally must stay registered for at least 12-months.
How do I register for GST?
Firstly, you need to have an Australian Business Number (ABN). Once you have an ABN, you can register for GST through the ATO or a registered tax or BAS agent.
Why would I consider registering for GST if I don't need to?
When trying to determine whether or not you should register for GST, when you're not required to, it can help to speak to a registered Tax Agent. They can run through the pros and cons in relation to your business.
Generally speaking, the benefits of registering for GST can include:
The ability to claim GST credits for relevant business purchases.
Not having to change your systems and processes at a later date, should your turnover reach the required threshold. Getting into good bookkeeping habits early, especially if you expect your business to grow, can save you time later.
Maintaining consistent expectations with your customers. For example, if you register for GST at a later date, your invoice amount will increase by 10%. While some customers may be able to claim GST credits, others may not.
On the flip side, registering for GST when you don't need to does increase your administrative time. You will be required to lodge a Business Activity Statement (BAS) and you will also need to hold the funds you owe the ATO. This can cause cash flow issues, especially in a new business.
Do you need some legal help with the setup of your new business? While we cannot provide you with taxation advice, we can help with other aspects of your business, including setting up your business structure, contracts, your business name and trademarks and terms and conditions - just to name a few. Contact our team for a no-obligation chat.