Navigating the Goods and Services Tax (GST) is a crucial aspect of managing your business in Australia. Here’s an overview of what GST is, how it works, and the implications of GST registration for your business.
GST, or Goods and Services Tax, is a 10% tax applied to most goods, services, and items sold or consumed in Australia. As a business owner, you collect this tax from customers at the point of sale and remit it to the Australian Taxation Office (ATO), which then redistributes it to State and Territory Governments.
A tax invoice is an essential document for sales transactions. It details the goods or services sold, including the quantity, price, GST amount, and any additional charges like delivery fees or taxes. Note that some items, like fresh food, education, and medical services, are GST-free and not subject to this tax.
GST registration is advised if your business falls within the GST scope. It allows you to charge GST on public-facing products and services. This extra tax is claimable on business expenses, reducing your overall tax liability. However, before registering for GST, ensure you have an Australian Business Number (ABN). If you're starting a business, registering for a business name with the Australian Securities and Investments Commission (ASIC) is also crucial.
GST registration isn't mandatory for small businesses with an annual turnover of less than $75,000. However, if your turnover exceeds or is likely to exceed $75,000, registration becomes obligatory.
Your GST turnover is your gross business income, excluding tax-free, GST-free, and input-taxed sales. This turnover calculation is based on your gross income, not profit. It’s your responsibility to register for GST if your turnover exceeds or is expected to exceed the $75,000 threshold.
Failing to register for GST when required can result in penalties. If you're starting a new business and anticipate an annual turnover of $75,000 or more, it's advisable to register for GST right away.