All you need to know about registering for and calculating GST
As a small business it can be confusing and time-consuming trying to work out how GST works. But don't worry, we're here to help. This guide will cover:
- What GST is
- When to register for GST
- How to calculate GST
- When to issue GST-invoices
- Claiming GST credits
- Your GST reporting obligations
What is GST?
Goods and Services Tax (GST) is a 10% tax put onto most goods and services provided in Australia. The Australian Taxation Office (ATO) collects GST from businesses and then the government uses the money to pay for public services and infrastructure throughout the country.
Not everything for sale in Australia has GST attached to it. Some goods and services are exempt, including basic foods, some education courses and certain medical, health and care products.
When to register for GST?
So if your business sells goods and services that aren't GST-free, you'll have to register for GST if:
- You run a business or enterprise with an annual turnover of $75,000 or more
- You run a not-for-profit organisation with an annual turnover of $150,000 or more
- You are a taxi or ride-sourcing driver – regardless of what your annual turnover is
You need to register for GST within 21 days of any of these things happening to your business. And you'll need your Australian Business Number (ABN) to hand when you register.
- You can register online
- By phone on 13 28 66
- Or through a registered tax or BAS agent
How to calculate GST
Once you're a GST-registered business, you need to add GST to all your prices. Here's an easy formula for calculating it:
Your price x 1.1 = GST-inclusive price
And here's an example of it in practice:
$45 x 1.1 = $49.50
You can also use the ATO's recommended GST calculator on the MoneySmart website to double check your working out.
When to issue GST-invoices
When you make a taxable sale of more than $82.50 (including GST), you have to give your customers a tax invoice so they can see the amount of tax being added to the total cost – and so they can claim GST credits if they're a GST-registered business too.
There are 9 key pieces of information you need to include in your invoices:
- The words 'tax invoice' should be somewhere clear on the page
- The buyer's identity or ABN (optional if the sale is less than $1000)
- A brief description of the goods or services you've sold
- Date invoice was issued
- The seller's name
- Your ABN
- The pre-GST price
- The amount of GST added
- The total cost to your buyer
Claiming GST credits
GST-registered businesses can claim back GST credits if:
- The purchase was made to help run your business (e.g. stationery, inventory or work tools)
- The purchase doesn't relate to input-taxed supplies
- The purchase price included GST
- You paid for, or will be liable to pay for, the goods or services purchased
- You have a tax invoice from the seller for purchases more than $82.50
- A customer leaves you in bad debt when they don't pay for your goods or services
For more information about claiming GST credits visit the ATO's website.
Make sure you keep and store your invoices and receipts so you can claim all the GST credits you're entitled to.
Your GST reporting obligations
You have to tell the ATO how much GST you've collected from your sales income. You'll report your GST in your Business Activity Statement (BAS). How often you report your GST depends on your annual turnover.
Monthly – if your GST turnover is $20 million or more.
Quarterly – if your GST turnover is less than $20 million, and the ATO hasn't told you that you must report monthly.
Annually – if you're voluntarily registered for GST and your GST turnover is less than $75,000 ($150,000 for not-for-profit organisations).
You might be able to choose a different GST reporting and paying cycle, e.g. if you report quarterly but want to report monthly, for more information on this visit the ATO's website.
GST tips for small businesses
As a GST-registered business, issuing tax invoices, collecting GST from customers and sending information to the ATO alongside your BAS can be a bit of a handful. Here are three easy tips to make things a little simpler.
- Put aside the GST you collect in a seperate bank account so you're not caught out when it comes to paying the ATO.
- Use business accounting software to create tax invoices and GST reports in seconds.
- And keep things balanced between how much GST you owe and your cash flow by using the 'cash accounting' option.
Get more tips and tools to help your business thrive
How to use Key Performance Indicators (KPIs).
Use KPIs at different levels in your business to set goals, achieve success, and track how your business is performing.Learn more
Demystifying Australian business activity statements (BAS)
If your business is generating revenue over $75,000 Business Activity Statements (BAS) should ring a bell.Learn more