GST stands for Goods and Services Tax and is a flat 10% tax levied on the supply of certain goods and services. As a business, it is important to understand when you have to pay GST and the steps you need to take to pay GST. This article will discuss:
- who needs to pay GST;
- how GST works; and
- how to pay GST.
Who Needs to Pay GST?
GST is payable by the suppliers of certain goods and services. You will need to register for GST if you:
- have a business turnover of at least $75,000 or more;
- are a non-profit organisation and have a business turnover of at least $150,000 or more; or
- provide taxi travel or ride-sourcing services.
Often, if not always, the cost is passed onto the consumers of those goods and services. This is why GST is referred to as an indirect tax to businesses.
How Do I Pay GST?
1. Register for GST
If you qualify for at least one of the criteria above, you are required to register for GST. To register for GST, you will need an Australian Business Number (ABN). Once you have an ABN, you can register for GST:
- via the ATO’s Business Portal;
- by calling the Australian Taxation Office (ATO) on 13 28 66; or
- through your registered tax or Business Activity Statement (BAS) agent.
However, even if you have registered your business for GST, you do not necessarily have to pay GST on all goods and services you provide to the public.
2. Work Out Whether Your Sales Are Taxable
You are required to pay GST on all goods and services you provide unless they are GST-free or input-taxed. You can pass on the cost of GST to your consumers by adding the flat 10% GST to the price you charge for your goods and services.
GST-Free Goods and Services
Some goods and services are GST-free, including:
- most basic foods;
- some education courses;
- medical products and services; and
- health and care products and services.
This means that you cannot charge your consumers GST when you sell these types of products or services. However, when you lodge your Business Activity Statement with the ATO, you can claim a refund for the GST you paid on input materials you purchased.
Input-Taxed Goods and Services
Similarly, you cannot charge your consumers GST for input-taxed goods and services. Input-taxed goods and services are goods and services that do not include GST in the price. These include:
- financial supplies, for example, the lending and borrowing of money; and
- the sale and rental of residential premises.
However, unlike GST-free goods and services, you cannot claim a refund for the GST you paid on the purchase of your input materials.
Should I Charge GST to My Customers Overseas?
Export products are generally GST-free. Again, this means that you do not have to charge your customers GST; however, you can still claim for a refund for the GST you paid for any input materials purchased. Nonetheless, you will still need to pay for GST in some circumstances.
3. Lodging Business Activity Statements (BAS) With the ATO
After the end of each business quarter, you need to complete a Business Activity Statement and lodge it with the ATO. In your BAS, you need to report the amount you have collected from your consumers as GST and pay the equivalent amount to the ATO.
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Key Takeaways
GST is an indirect tax payable by the suppliers of certain goods and services. If you are registered to pay GST, you first need to work out whether your goods and services are taxable. You cannot charge your customers GST if your goods and services are GST-free or input-taxed. You can charge your consumers GST by adding a 10% flat fee on top of the price you charge for your goods and services. As a business, you may also claim for a refund on the GST you paid yourself when you purchase input materials from suppliers. However, this will not apply if the input purchased is used to produce input-taxed goods and services.
If you have any questions about GST, our experienced taxation lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
Frequently Asked Questions
GST stands for Goods and Services Tax. It is a 10% sales tax levied by the Australian Government on certain products. This means that many businesses need to collect and pay GST to the Australian Tax Office.
Businesses with a turnover of at least $75,000 will need to register for GST. In addition, taxi travel, ride-sourcing services and non-profit organisations with a turnover of at least $150,000 also need to pay GST. If you fall into one of these categories, you will likely need to pay GFC.
Yes, in fact, most businesses do! You should include GST in the price that you charge for your goods. This allows you to collect the cost of GST from your customers rather than absorbing the cost yourself.
Not all goods and services are taxable. Some items are GST-free, including basic foods, some education courses and healthcare products. Other goods and services are input-taxed, meaning that the price does not include GST. For example, the lending and borrowing of money and the rental of residential premises.
You must first register through the Australian Tax Office Business Portal and work out whether your sales are taxable. At the end of each business quarter, you will need to report the amount you have collected from consumers as GST and pay this amount to the ATO.
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