Should my business register for GST?
Should my business register for GST?
This is a question I am often asked by potential clients. So what is the answer? Well it depends.
The first thing is to ascertain if you are operating a business or is it just a hobby. I’ve written about this in previous blogs on my website so I will not revisit this. Let’s just assume that you are running a business and you have applied and received and Australian Business Number (ABN).
To register for GST you must make a supply of goods and service, called taxable supplies, in the course of carrying on an enterprise and that supply is for consideration and is connected with Australia. However you do not need to be registered if the annual consideration received from supplies is $75000 or less. This trigger point increases to $150000 if you are a Not for profit entity.
Only entities that are registered or required to be registered can charge GST.
What if I my revenue is less than $75000?
Whilst it is optional to register for GST it is worthwhile considering registering for GST as you will be entitled to claim input tax credits on any GST paid on taxable supplies purchased for use in the business.
Here is an example why:
Company XYZ Ltd purchases stationary for $100 plus GST for use in the business. So the gross amount paid at purchase is $110.
IF registered then XYZ ltd firstly claims the $10 GST as an input credit. As a result they pay only $100 for the stationary. As it is also a deductible expense and the company tax rate is 30% they will receive a tax benefit of $30 ($100 x 30%). After taking this into consideration a GST registered company’s after tax cost for $100 of stationary is $70 ($110 – $10- $30).
If the company is not registered for GST then they are not entitled to claim the $10 input tax credit so, the after tax cost of the stationary becomes $77 ($110 – ($110 x 30%))
If you operate as a sole trader or through a partnership or trust entity then the quantum of any benefit will depend on your marginal tax rate.
What are taxable supplies?
Taxable supplies are supplies of goods & services that are not
• GST free supplies (such as fresh food), or
• Input taxed supplies (such as bank interest).
The full list of these types of supplies is defined within the GST ACT.
What Obligations do I have if I am registered for GST?
In the ordinary course of your business you can only charge GST if you are registered or required to be registered and you must issue an Invoice with the words “Tax Invoice” and it is required to show your entities name and ABN, date of the invoice and the amount of GST. Today’s Accounting systems have pro-forma tax invoices.
Your other obligation is to render a BAS return and remit to the ATO along with the net amount of GST collected. Large GST payers are required to do this monthly however most small businesses will render this quarterly. Again todays accounting system assist greatly in preparation of this information.
This article first appeared in SavvySME as should I register for GST
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PB Accountants recommend Quickbooks Online (QBO) and XERO (both cloud based). We’ve had plenty of experience with both packages-- and believe that (except in rare cases) one or other of these will be the best accounting system for our clients.
Need help choosing an accounting system? Just get in touch with Michael and he’ll help you decide.
If you decide you’d like us to take over your accounting, we will contact your old accountants on your behalf and ask them to forward all your information to us. We’ll also notify the Australian Taxation Office of the change. Done.
While we use and recommend Xero and Quickbooks Online, we’re happy to work with any accounting package you choose. After all, it’s you and your business we’re here to support.