The Australian goods and services tax (GST) is a value-added tax of ten percent on most goods, services and other items sold or consumed in Australia. Usually, businesses registered for GST include GST in the price they charge for their goods and services and claim tax credits for GST included in the price of goods and services they purchase for their business. It is important to have a general understanding of GST and the steps for registering your business for GST, because it is relevant to:

  • how your business prices its products and services; and 
  • how much your business pays in taxes. 

Why Register for GST

Registering your business for GST is required by law if your business has a GST turnover of $75,000 or more (calculated as gross income minus GST). Providing taxi or limousine services (including ride-sourcing) is an exception to this rule, and requires GST registration regardless of GST turnover. If you do not register your business for GST when you are supposed to, you may also have to pay penalties and interest on your business revenue. 

Tax Credits 

Furthermore, registering your business for GST enables you to claim GST credits (also called input tax credits), which allow you to claim a credit for any GST included in the price you pay on purchases for your business. These credits can be used to offset the amount of GST you are liable to pay to the government, effectively reducing your business tax obligations. When your GST credits are greater than the amount of GST owed to the government, this may entitle you to a refund. They also can be used to claim income tax deductions where applicable.

Eligibility for GST

You must register your business for GST:

  • within 21 days of your business GST turnover exceeding $75,000 ($150,000 for non-profit organisations); 
  • when you start a new business and expect your turnover to reach that GST threshold in the first year of operation; or
  • when you provide taxi or limousine travel for passengers (including ride-sourcing), regardless of your GST turnover.

Registering for GST is optional if your business does not fit into one of these categories. 

When Should I Register My Business for GST?

There are several commercial considerations which are relevant to whether you should register your business for GST before you reach that limit. Even though it might seem like avoiding GST registration before your turnover exceeds $75,000 would be beneficial, since not being registered means you would not have to charge GST, you may be missing out on GST credits.

Depending on your circumstances, this could make registration more commercially beneficial. It is also possible that your product or service is GST-free, meaning that you could benefit from credits without needing to charge GST on what you sell. Furthermore, registering for GST when purchasing a business enables you to purchase it as a going concern, which has significant tax benefits. It is best to consult a business lawyer or tax advisor on when it is commercially beneficial to register your business for GST. 

How Do I Register My Business for GST?

In order to register your business for GST, you need to have an Australian Business Number (ABN). You can get your ABN when you first register your business name or at a later time.

After registering your ABN, you can register for GST. You can register:

  • through the ATO’s Business Portal;
  • by phone;
  • through your registered tax agent or BAS agent; or
  • by completing the “add a new business account (NAT 2954)” form.

You must report on and pay GST to the ATO. To do so, and to claim GST credits, you must lodge: 

  • a business activity statement (BAS); or
  • annual GST return.

Canceling GST Registration

If you sell your business or shut it down, you must cancel your GST registration within 21 days of doing so. If you change your business structure, (e.g. from a partnership to a company), you may also need to cancel your GST registration. You can cancel your GST registration:

  • through the ATO Business Portal; or
  • by phone.

Key Takeaways

The Australian goods and services tax (GST) is a value-added tax of 10% on most goods, services and other items sold or consumed in Australia. Besides complying with the law in situations in which you must register for GST, the main benefit of registering is that you will be eligible to claim GST tax credits for any GST included in the price of goods and services you purchase for your business. You can register your business for GST online through the ATO website’s Business Portal. It is helpful to ensure that you have structured your business the way you would like it to operate before registering for GST, since changing your business structure may require you to cancel and then register again. If you need help registering your business for GST, contact LegalVision’s business lawyers on 1300 544 755 or fill out the form on this page.

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