Goods and Services Tax (GST)
Goods and services tax, often known as GST, is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. GST applies to most Australian businesses and it's highly likely that your business will be affected by the tax.
If your business is registered for GST, you'll have to collect some extra money (one-eleventh of the sale price) from your customers and pay it to the Australian Taxation Office (ATO) when it is due.
Do I need to register for GST?
You must register for GST if:
- your business has a GST turnover of $75,000 or more
- your non-profit organisation has a turnover of $150,000 per year or more
- you provide taxi travel for passengers in exchange for a fare as part of your business, regardless of your GST turnover. This rule applies to both taxi owner drivers and people who just rent a taxi.
As a business owner, it's your responsibility to register for GST if your turnover exceeds the $75,000 threshold or is likely to exceed it.
The ATO advises that if you've just started a new business and expect it to earn $75,000 or more in its first year of operation, you should register for GST.
GST turnover is your business's gross income, not your business's profit.
If your business doesn't fit into one of the above categories, you don't have to register for GST.
Head to the ATO website to work out your GST turnover.
If you run an online clothing store and you sell $80,000 worth of clothes, you'd have to register for GST because your GST turnover is over the $75,000 threshold. This rule still applies, even if you only get to keep $40,000.
Overseas businesses selling to Australian consumers
You must register for GST if you're an overseas business importing services and digital products to Australian consumers and make over A$75,000.
If you're a merchant selling imported services or digital products or an electronic distribution platform operator facilitating these sales, you should consider registering for GST. This includes:
- digital products such as streaming or downloading of movies, apps, games and e-books
- imported services such as architectural or legal services.
From 1 July 2018, you'll need to register for GST if you're an overseas business making over A$75,000 and sell low value imported goods to Australian consumers. This will affect goods valued at A$1000 or less on items like:
- electric appliances.
You can find more about Tax on retail sales of goods and services into Australia on the ATO website.
When do I need to register?
If you haven't registered for GST, and you become aware that your GST turnover will exceed the $75,000 per year threshold, you will have to register for GST within 21 days.
It's a good idea to check each month to ensure you're not likely to go over the over the limit. Keeping an eye on your GST turnover is important so you can register if necessary.
If your GST turnover is below the $75,000, registering for GST is optional.
You may choose to register if your GST turnover is below the $75,000 threshold, however this means that once registered, regardless of your turnover, you must include GST in your fees and claim GST credits for your business purchases.
How do I register for GST?
- You need an Australian Business Number (ABN) to register for GST. Your ABN is part of the GST system and your ABN will be used as your GST registration number.
If you don't have an ABN and are registering for one, you can use the same online form to apply for tax registrations during the application process. If you anticipate that your GST turnover will be over $75 000, make sure you register for GST when completing your ABN application.
Go to the Business Registration Service. You will be able to register for GST and other taxes on the same form.
If you are unable to register online, you can contact the ATO or register for GST through a registered tax agent.
What are GST credits?
GST credits are a potential amount of money your business might be able to claim from the ATO.
If you are registered for GST, you can claim back the GST that has been included in the purchase price of something you've bought for your business.
Laura runs an accountancy firm and has just bought a new computer for the office. The computer cost Laura $1100, including GST. Because GST is one-eleventh of the sale price, Laura would have paid $100 in GST.
Laura is registered for GST because her business's GST turnover is more than $75,000. She is able to claim GST credits for the GST included in the sale price of her computer ($100).
If at the end of the year her GST credits are higher than the amount of GST she has to pay the ATO, she will be able to get a refund.
If you’re registered for GST, your invoice must be a tax invoice. Tax invoices are different to regular invoices as they include the GST amount for each item along with some extra details.
Tax invoices must be formatted correctly for you to be able to claim you full tax entitlements.
Find out more about tax invoices, including how to correctly format them.
What happens if I don't register for GST?
If your GST turnover is under $75,000 and you don't register for GST, you won't include a GST component in your prices. This means that any invoices you provide will need to show that GST was not included in the purchase price. You also can't claim GST credits for your business purchases.
Small business GST concessions
If your business has an annual turnover of less than $10 million, you may be able to access the following GST concessions.
Accounting for GST on a cash basis
You can account for GST in the same tax period you receive payments from your customers and claim input tax credits for making payments to your suppliers.
Paying GST by instalments
You can pay GST by instalments each quarter based on what you or the ATO estimates your GST liability to be. You can vary this amount each quarter.
Annual apportionment of GST input tax credits
You can claim a full input tax credit for a business purchase that you intend to use partly for private purposes and make a single adjustment to account for the private use percentage at the end of your income year.
What to do...
- Visit the ATO website for more information on GST and excise concessions for small business.
- Download the ATO's GST Governance and Risk Management Guide for checklists on assessing your GST compliance and risk management processes.
- Learn more about registering for GST, including helpful videos, on the ATO website.
- Use the GST calculator on the MoneySmart website to work out how much GST to include in your prices.
- Speak to your accountant for more personal advice about your business and tax.