New starter’s guide to GST for business
What you need to know about GST in the time that it takes to clear your desk.
From sorting out GST registration from GST credits, this article will teach you some basics about GST for business before you’ll be able to find your mouse pad.
We’ve cut through the clutter so that this article only takes three minutes to read.
Goods and Services Tax (GST) is a tax of 10 percent applied onto most goods and services provided in Australia.
But how does GST affect you, as a small business owner? What do you need to know about it?
Most small businesses in Australia will have some GST obligations. You may be required to account for GST in the sales price of your product or service.
But it’s not all bad news. Many businesses will qualify for GST credits for various transactions, meaning that you can claim back some of the GST that you’ve paid and funnel that money back into your business. Winning!
Registering for GST
Most businesses will have some GST obligations. You must register your business for GST with the Australian Taxation Office (ATO) if the following criteria apply you:
- Your annual business income is, or is expected to be, $75,000 or more a year. This number increases to $150,000 or more for non-profit organisations
- You provide taxi travel as part of your business, meaning you charge passengers for transport passengers by taxi or limousine
- You want to claim fuel tax credits
You have to account for GST in the price of most products and services that you sell.
But there are certain items and categories that are exempt from GST. They include some food and beverages, some educational products, some medicinal products and charitable services, to name a few.
You can find more information about which items are GST-free here.
How to claim GST credits
As GST is a tax paid by individuals, not businesses, you can claim back the GST you have paid for things that you have bought for your business.
To claim a GST credit for a purchase that cost more than $82.50 (including GST), you must be registered for GST and have a valid tax invoice. Be sure to ask your suppliers for a valid invoice every time you make a purchase for your business.
Find out what details you need to include on a valid tax invoice here.
For items that cost $82.50 or less (including GST), usually a receipt is all you need. Just make sure you’ve registered for GST and keep all dockets, receipts or invoices to support your GST claims.
Make sure you keep your tax invoices and other GST records for at least five years. These will make life easier for you come reporting time, and in case of auditing.
We’ve also put together some helpful tips for managing your Business Activity Statement (BAS) and GST for your quarterly report, which you can find here.
Issuing tax invoices
When you make a taxable sale of more than $82.50 (including GST), your GST-registered customers will need a tax invoice from you to be able to claim GST credits for their own businesses.
You can find out the specifics about what you need to include here.
Accounting for GST in your business
As a GST-registered business, you need to issue tax invoices to your customers, collect GST from your customers and send them to the ATO alongside your BAS.
Here are a few tips to make this process easier to manage:
- Put the GST you collect in a separate bank account, so you’re not caught out at reporting time
- Use business accounting software to produce tax invoices and automatically generate reports of your GST liabilities and credits at BAS time
- Take advantage of the ‘cash accounting’ option to better align your GST liabilities with your business cash flow
- You can read more tips about managing your GST and BAS here.
MYOB accounting tools can also make it a breeze to keep track of GST. You can find out which one is best for your business here.
Top 3 takeaways
- You might be required to apply GST to your goods and services.
- You can claim GST credits on items you have bought for your business.
- You need to account for GST on your BAS and keep all supporting documents for at least five years.
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