When you’re running a business, sales tax, more commonly referred to as the Goods and Services Tax (GST), is a key concept you’ll need to be familiar with – both for financial stability and to stay compliant with the Australian Taxation Office (ATO).
So, in this article, we’ll be providing an overview of all you need to know about GST and how it can affect small business.
Key Considerations for GST:
GST Registration
First things first, you’ll need to determine if you’re legally obliged to register for GST. Generally speaking, every business with an annual turnover of over $75,000 needs to register for GST.
Having said that, certain exceptions, including different GST thresholds, might apply to specific industries, so this figure can be subject to change. Non-profit organisations, for instance, are not required to register for GST until annual turnover reaches $150,000. Our recommendation is to speak to your accountant, or consult ATO guidelines to understand the specific requirements or obligations for your business.
Collecting GST
As a business owner, you’re required to collect GST on any taxable sales, which means you need to add the 10% GST to anything you sell within Australia.
To ensure that your customers can claim their full GST credits, tax invoices must be formatted correctly. You need to make it clear whether your pricing includes GST, or clearly specify the amount of GST separately.
Lodging Business Activity Statements (BAS)
After this, you’ll need to report your GST activity to the ATO fairly regularly, including both the GST you have collected from customers and the GST you have paid to suppliers. This is done by lodging Business Activity Statements (BAS),which are typically lodged on a quarterly basis. However, small businesses may choose to lodge annual GST reports, while businesses that make over $20 million annually need to do this monthly.
BAS might come with other tax obligations or tax credits, such as Pay As You Go (PAYG) tax you have withheld from employee wages, your own income tax instalments, or Fuel Tax Credits.
Seek Professional Guidance
Understanding and correctly reporting GST obligations can be fairly challenging for small business owners.
To ensure you’re always staying compliant and receiving all the possible deductions you can, contact YBM today to find out how we can help. Whether it’s understanding your specific GST obligations or generally helping you keep accurate records, our accounting services ensure you’ll always be on the right side of the ATO.