In some circumstances, it is compulsory to register for GST because of your turnover or because of your profession.
But sometimes, it is good to register for GST because it benefits you.
Remember, GST is the Goods and Services Tax. This means it is a consumer tax that is charged on…well, purchasing goods or purchasing services. It only happens when something is bought or sold (by GST registered entities).
Why did I emphasise that it is a consumer tax? Because if you, the business owner, registers for GST then the tax department expects you to charge the 10% GST on top of your usual price. This means your customer pays the tax, not you, and you are merely (sorry to tell you) the tax collector.
Of course, raising the cost of your product/service by 10% so you can give it to the tax department isn’t a benefit to you. However, claiming GST back on something you have purchased is. For instance, lets say that you bought a piece of equipment for your business from a GST-registered company and it cost $6,600. If the equipment is 100% business use, you can claim the GST of $600 back. You are effectively paying $6,000 instead of $6,600.
You must register for GST if your enterprise is connected with Australia AND:
- You run a business and the GST turnover (effectively the income of your business excluding GST) is $75,000 or more in a financial year
- You run a business and it becomes apparent your GST turnover for the financial year will be $75,000 or more. You then have 21 days to register
- You carry passengers in exchange for a fare such as a taxi, mini bus, limousine or ride sharing services such as Uber. There is no threshold.
- You want to claim fuel tax credits
- You run a not-for-profit organisation and the GST Turnover is $150,000 or more
It may be beneficial to you register for GST if:
- You are going to be making large purchases from Australian companies. Benefit: you can claim the GST credit back
- You expect your business turnover to increase relatively quickly. Benefit: you are registered early so when you get really busy you don’t accidentally forget to register for GST. If you go over the $75,000 threshold, the tax office can require you to pay GST on your sales, even though you didn’t actually collect the tax,
- The goods or services that you provide are exempt from GST – such as some health and medical products or services, some education courses or you provide basic food items such as vegetables and meat. Benefit: you can claim GST credits, but don’t have to collect any GST from your customers.
You will be surprised how much you can save when you get the right advice.