GST = Goods and Services Tax
It’s that good, we have to tax it.
GST means goods and services tax. It's a 10% tax applied to most products and services in Australia. This is a tax that is designed to tax the end consumer. It’s almost like when you register for GST you work for the ATO, because you start collecting a tax from your customers which you owe to the ATO, minus any amount of GST you paid to your suppliers.
If/when you register for GST:
- you may need to add GST to your prices
- you will need to send that extra money to the ATO
- you can claim back any GST that you’re charged on business supplies and expenses
There are some products and services that are GST-free, meaning you can sell them without adding the GST, even if you are registered: things like fruit and veg and some medical services. The ATO has a full list here.
Generally, you don’t have to charge GST on exports so long as the goods leave Australia within 60 days of you receiving payment or issuing an invoice, whichever comes first.
When to register for GST
You need to register for GST when your GST Turnover is $75,000 or more.
The period we look at is not ‘this financial year’, it is:
- This month plus the last 11 months, and/or
- This month plus forecast for the next 11 months
What is GST Turnover
Classic accounting terminology… It is complicated, but also sometimes simple!
The ATO refers to GST Turnover. Accounting terms do have very specific definitions, and while for most of our clients GST Turnover simply means your business income (the top line... the money earned or received from clients), for some people it is more complicated.
So, we are going to note it here in case it is relevant to you!
But, we then reduce it by any of these:
GST included in income - if you are already registered for GST and you want to figure out the value of your 'GST turnover' then you need to look at the total sales minus the GST bit. For example:
$110,000 earned from customers including the GST you collected
(-) $10,000 of GST you collected
= $100,000 of GST turnover being the sales excluding GST
Sales that aren't for payment or aren't taxable - I really hope you are making sales for which you get paid. But if you process a sale for some reason that you don't get paid for then don't include that. To figure out what is not taxable it is sometimes easier to look at what is taxable. Here is what income is taxable:
- you make sales for payment
- you make these sales in the course of running your business
- the sale is connected to Australia
Sales not connected with an enterprise you run - basically, exclude anything that was personal or domestic, or related to a charity or religious institution. For almost 100% of my clients, any income for the ABN is going to be connected to the enterprise you run.
Input taxed sales - Two of the most common types of input-taxed sales are:
- financial sales (like lending money, buying shares etc.)
- supplies of residential premises for rent or sale.
Sales not connected with Australia - connected with Australia basically means if the goods or services are provided to an Australian purchaser, made here etc. Generally, export of goods and services from Australia are generally GST-free.
GST Registered… now what?
From the registration date you need to start collecting GST and recording GST collected and paid (and then start reporting this to the ATO in the BAS - which we will help with if you like).
You should add the 10% on top of your prices, otherwise the ATO is just taking 10% of your income now. If you previously charged $100, you now charge $100 + $10 of GST. This means you receive $110 from the customer, with $100 being for you (reported in the end of year tax return) and $10 being the ATOs GST (reported in the BAS each month/quarter/year).
You have probably been paying GST on some of your expenses already. Now you just need to keep a closer eye on those receipts to see whether GST was charged or not.
For example, in the past you might have paid $300 for something. You would have included the full $300 in your income tax return at the end of the year. But if that $300 actually included some GST ($27.27), now you need to split that out for reporting: $272 of expense (reported in the income tax return at the end of the year) and $27.27 of GST on expenses (reported in the BAS).
You need to keep records of the GST collected and the GST paid (and of course keep copies of supporting documents).
Helpful calculations:
GST exclusive price x 0.1 = GST amount to add on top
GST exclusive price x 1.1 = GST inclusive price
GST inclusive price / 1.1 = the GST exclusive amount
GST inclusive price / 11 = the amount of GST included in the price quote
Examples:
$100 x 0.1 = $10 GST to add on top
$100 x 1.1 = $110 GST inclusive price
$110 / 1.1 = $100 being the GST exclusive price
$110 / 11 = $10 the amount of GST included in the price
Record Keeping
Now the fun bit. Just like we need to record info for your year end tax return, we also need to record info for the BAS (business activity statements). For all relevant income and expenses, we basically need to know:
GST exclusive amount + the GST bit = GST inclusive amount
Be sure to check supporting documents (receipts) to confirm when you have or have not been charged for GST by your suppliers for expenses. Some might get coded as GST free expenses and others as GST on expenses.
You can record this in a spreadsheet (we’ve got templates for our clients!) or in your accounting software system.
Hot tip: if you are using software already (and/or selling online using a platform like Shopify or other invoicing software) be sure to update your financial settings, invoicing settings and chart of accounts, so that the GST bit is correctly accounted for.
Keep all receipts in the Google Drive folder. I recommend having the Drive app on your phone so you can just take photos of physical receipts and upload them all directly into there. You can also quickly save PDFs from emails etc. directly to the drive that way too.
What to report?
This depends on whether you are registered on your registration again - cash or accrual. If you have a turnover of less than $10 million (which let's be honest, is all my clients) then you get to pick! You can read up on the options here on the ATO website.
Our usual recommendation is you pick cash because then you will be reporting in your BAS the GST you have actually received and actually paid (rather than reporting GST you have invoiced for but not yet received). This is especially important if you invoice well in advance (like in events) because otherwise you owe the ATO for GST you have not yet collected from your customers.
Hot tip: If you are an importer you may be able to defer the payment of GST by participating in the deferred GST scheme. You can read up on the ATO info here.
How to report?
We report the GST info to the ATO in a Business Activity Statement ('BAS'). Read more here. Depending on what is relevant to your business and what other taxes you are registered for, there may be many elements in your BAS.
The common ones we see for our clients are:
- GST = which once we register you will be relevant!
- PAYG-W = pay as you go tax withheld, being the tax that you as an employer have withheld from employees pays (you pay this to the ATO on employees behalf). More info here.
- PAYG-I = pay as go you tax installments, being pre-payments towards next year's income tax bill. More info on this here.
How often do you need to report?
Well, this depends on your registration. While almost all of our clients pick quarterly the ATO gives you some choices here again - read up on them here.
- If your GST turnover is over $20 million you have to report monthly. That is pretty much none of my clients.
- If your GST turnover is less than $20 million you can report quarterly <<< this is probably you.
- If you are voluntarily registering (i.e. GST turnover is less than $75,000) then you can report annually.
Key Dates
Annual BAS: The ATO will send you (or us on your behalf) an annual GST return in July. The first return will be for the period from the date your election took effect to 30 June. Thereafter it will relate to the period 1 July to 30 June.
The date for lodgment of your annual GST return and payment of any amounts is either:
- the date for lodgment of your income tax return (i.e. lodge them at the same time!), or
- 28 February following the annual tax period, if you are not required to lodge an income tax return.
Quarterly BAS: There are 4 quarters in a year. The first one you do will be from the date of rego to the end of the relevant quarter.
- Quarter 1 = 1 July to 30 Sept, due 28 Oct
- Quarter 2 = 1 Oct to 31 Dec, due 28 Feb
- Quarter 3 = 1 Jan to 31 Mar, due 28 Apr
- Quarter 4 = 1 Apr to 30 June, due 28 July
Monthly BAS: Your activity statement must be lodged and payment made by the 21st of the following month. If the due date falls on a weekend or a public holiday, you have until the following business day to lodge and pay.
You are welcome to lodge it yourself, but of course if you don’t feel confident we recommend you get in touch with us and we can send through a proposal for our services.
