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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. Usually, businesses registered for GST include GST in the price they charge for their goods and services, and consumers pay this amount. They also claim tax credits for GST included in the price of goods and services they purchase for their business. If you operate a business, you need to know which circumstances require you to register for and pay GST on the goods and services you are supplying. This article will explain:

  • which businesses are eligible for GST;
  • the benefits of registering for GST;
  • the consequences of not registering; and
  • the process for registration. 

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. 

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. GST credits are tax imputation credits available to businesses concerning the goods and services they purchase for sole or part use in their businesses. 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.

If the price of such goods is more than $82.50, you must retain an invoice for the purchase as proof to claim the GST credit.

Consequences of Not Registering for GST

If you do not register for GST, either by avoidance or ignorance, there can be serious penalties. Likewise, you will have to re-pay the GST owing on the supply of goods and services from the date your business became liable for GST. This can result in severe consequences for businesses, as you may end up with a GST tax bill on goods and services which you have not collected from the customer directly. 

You cannot go back and ask previous customers to pay this tax – the funds will need to come out of the business’ profits. 

Not registering for GST also means that your business will miss out on credits for inputs. For example, you might buy an input for $55 (with $5 of GST) and then sell the product for $100. If you are registered for GST, you need to charge $110 (an extra $10 GST).  Of that $10, you can keep $5 as an offset for your credit and give the ATO $5.

In effect, you receive get an extra $5, although the customer pays an extra $10. If your customer is a business customer, they will not mind paying the extra $10 GST since they can claim it back themselves. Therefore, being registered for GST also makes you look a little more professional – it is unusual for a business to not be registered and it will be obvious you are very small scale if you are not invoicing for GST.

When Should I Register My Business for GST?

There are several commercial considerations that 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.

GST-Exempt Goods and Services

Some goods and services are GST-free. These generally fall into the category of necessary household goods, feminine hygiene products (although only some), and goods that are to be exported overseas for sale. Some examples include:

  • basic food items;
  • some educational resources;
  • some medicines;
  • duty-free goods;
  • some childcare services;
  • precious metals;
  • farmland; and
  • international mail.

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.

Frequently Asked Questions

What is GST?

Goods and Services Tax (GST) is a value-added tax on most goods and services in Australia. It is a tax that consumers pay but is collected by businesses that supply goods and services.

When can my business register for GST?

You can register for GST as soon as you start a business. However, you will not be required to pay GST until your annual turnover reaches $75,000 or more. The threshold for non-profit organisations is $150,000 for non-profit organisations.

What are the consequences of not registering for GST?

There can be serious penalties if you do not register for GST. You will need to re-pay the GST owing on the supply of goods and services from the date your business became liable for GST. Consequently, you may end up with a GST tax bill on goods and services which you have not collected from the customer directly. 

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