When it comes to tax in Australia, it can be hard to get your head around all of your obligations, especially if you are starting your first small business or something similar. Goods and services tax (GST) is an area of confusion among a lot of first time business owners, and is something that gets brought up at accountants offices regularly.
GST in Australia is very confusing. Some small businesses have to have it. Some small businesses don’t. So how do you know if you need to register for GST? Basically, it all comes down to how much money you expect your business to turn over each financial year.
Firstly, what is GST?
GST, or goods and services tax, is basically a small fee that the government puts on top of all purchases and sales in the country. It currently sits at 10% of the price of the item, which means that when you sell something, you will actually have to collect 110% of the amount that you actually want to sell it for – if your business is registered for GST. The 10% tax rate then needs to be paid on to the Australian Tax Office (ATO).
When do I need to register for GST?
There are two important things to consider here:
- As a business owner, you can actually register for GST at any time, regardless of your income or turnover.
- Once your annual turnover reaches $75000 ($150000 for non-profit organisations), you are required to register for GST by law.
- If you are a taxi driver, you have to register for GST, no matter how much you earn per year.
So really, unless you turnover more than the $75000 threshold every year, there is no need to register for GST – unless you want to. There are a number of reasons why a business earning less than the $75000 threshold would choose to register for GST, and these are explored below
So, what are the benefits of registering for GST?
There are plenty of benefits associated with registering for GST. These include:
- Your business will be ready to grow – If you are starting a new business that you plan on growing in the future, it will be best to have everything set up from the beginning.
- You can claim GST credits – If you are registered for GST, you may be able to claim GST credits on items that you have bought for your business.
- It may open you up to other benefits – Registering for GST may allow you to register for things like Fuel Tax Credits.
The choice to register your business for GST or not will depend on the type of business you have, your income, and on how you run your business. If you turnover more than $75000 per year, you will have to register for GST. Even if you don’t it still may be beneficial. Do your research and find out!