Whether you are starting or growing a business, you will probably wonder at some point whether the Goods and Services Tax (GST) affects you. We’ll explain how GST works, when to include GST and when to exclude GST to ensure you meet your tax obligations.
The Goods and Services Tax is a broad-based tax levied at a rate of 10% on most goods and services sold or consumed in Australia. The general public ultimately pays this tax but the ATO relies on local businesses to collect the money on its behalf.
The GST registration threshold or GST turnover is $75,000 for businesses, or $150,000 for non-profit organisations. You must register for GST if you fall into one of these categories according to the ATO:
GST turnover refers to your business revenue rather than profit.
Startups and enterprises not registered for GST should assess sales figures regularly, as once your revenue breaches the annual turnover threshold, you will only have 21 days to register your business to avoid penalties and interest.
After registration, you must charge GST at the current rate of 10% when supplying goods or services that are subject to this tax.
For example, if the value of your supply is $50 excluding GST, then:
Although these calculations are relatively straightforward, the trick is to ensure you only charge GST on taxable sales. Use QuickBooks free GST calculator to have peace of mind when calculating your GST.
You need to include GST on the goods and services you sell in Australia if you are registered for GST or required to register for GST if you fall into one of the categories above. This is called a taxable sale.
To qualify as a taxable sale with GST included in the price, a sale must be:
For taxable sales, make sure to meet the following obligations:
However, you can exclude GST if the goods and services you sell in Australia are GST-free or input-taxed, regardless of whether you are registered for GST or required to be registered. This is called a GST-free sale because the goods and services are GST-free and exempt from GST.
Below is a list of some GST-free or GST-exempt goods and services from which you must exclude GST:
Please note this is not an exhaustive list. Visit the ATO website for more information on GST-free goods and services.
Small businesses will typically have to complete and lodge a Business Activity Statement (BAS) and pay GST to the ATO every three months. These tax periods run from July to September, October to December, January to March and April to June.
If you calculate and pay your actual GST quarterly, you can choose to report quarterly or annually. However, if you pay quarterly instalments determined by the ATO, then you will report GST annually.
You can potentially claim refunds for the GST you paid on business purchases. Known as GST credits, these are offset against the GST you owe to determine your net obligation to the ATO.
For a purchase with the GST inclusive price of $110:
GST affects most businesses. It’s important to keep track of your GST to ensure your BAS are lodged correctly. QuickBooks tax software makes it easy for small businesses to lodge their BAS and prepare for tax time. Try a 30-day free trial and see how QuickBooks can streamline your tax and BAS workflow today.
TAKE A NO-COMMITMENT TEST DRIVE
Our customers save an average of 9 hours per week with QuickBooks invoicing*
By entering your email, you are agree to our Terms and acknowledge our Privacy Statement.
Intuit helps put more money in consumers’ and small businesses’ pockets, saving them time by eliminating work, and ensuring they have confidence in every financial decision they make.
3x WeMoney Award Winner
