Beginner's guide to GST
GST can be a tricky topic when starting a business. GST is everywhere, it’s on your groceries and your electronic devices. It’s that extra $20 you spent on those really nice shoes. It’s also the new roads, schools and houses that we’re so lucky to have. As consumers we’ve become well accustomed to the word GST; but as a business, we freak out every time the word is mentioned. In this guide we’ll show you how GST works and what it means for your business.
Do I need to register for GST?
You only need to register for GST if:
- Your business had a GST turnover of $75,000 or more.
- Your non-profit organisation has a turnover of $150,000 per year or more.
- You provide taxi travel in exchange for a fare.
If this isn’t you, then stop reading! However, if you eventually reach the $75,000 threshold, you must register for GST within 21 days.
How GST works
GST works its way from the primary supplier to the final customer. Businesses must include the 10% tax in all their prices (unless the product/service is GST-free). GST is a consumer-based tax, meaning that it only affects the customer, not your business. So basically, the consumers pay the tax, you collect it for the government, the government spends it on roads, housing, public transport etc. and everybody lives happily ever after.
How is it implemented?
Before you hop on the GST train, there are a couple of house keeping rules you should follow. Make sure you have a bookkeeping system in place and make sure you can send tax invoices. If your books aren’t organised, you will have a hard time keeping up with your GST obligations. Honcho can do your bookkeeping for you here.
1. Include GST in your price
Most goods and services sold in Australia are taxable unless they are GST-free or input-taxed. You should make sure your sales are taxable before you apply GST to the price.
2. Issue tax invoices to your customers
If you are registered for GST you must include the GST price on your invoices. If a GST-registered customer makes a purchase from you of $82.50 or higher, you must give them a tax invoice so they can claim their tax credits. Honcho’s invoicing tool has a GST option, which automatically calculates your GST price.
3. Pay the GST you’ve collected when you lodge your Business Activity Statement (BAS)
GST-registered businesses act as tax collectors for the government. They pay the tax to the government through their Business Activity Statement. This is usually lodged every quarter, which is why it’s so important to have a bookkeeping system in place.
Claiming GST credits
As mentioned earlier, GST is not a tax on business. You are entitled to claim the money you spent on GST provided that:
- you intend to use your purchase in carrying on your business.
- the purchase price included GST.
- you paid for the item.
- you have a tax invoice from your suppliers (for purchases over $82.50).
If your purchases have met some of these requirements, you can apply for your GST credits through your BAS statement.
Note: You will only get money back if your GST expenses are higher than your GST income.
How to Register for GST
You can register for GST within your Honcho account, or over the phone with a specialist (1300 550 730). Make sure you have an active ABN before you register.