Goods and services tax (GST) is a multi-stage value-added tax levied on goods and services that are sold for home consumption. It is a comprehensive tax that aims at curbing the effects of other indirect taxes. Unlike other commercial-related taxes, the business pays, with GST, the consumer pays the tax (included in the final price of the good or service). Still, the business retains the responsibility to remit the taxes to the government after making the sales. Business owners have several things to gain from registering for the tax. In this article, learn what you need, how, and what you benefit from registering for the Goods and Services Tax.
Who needs to register for GST?
You may be on the fence about registering for the Goods and Services Tax. We understand that you may need some clarification before taking the next step. Your business needs to register for the GST if it meets any of the following conditions:
- International retailers with total Australian sales of $75,000 a year or more
- Australian based businesses with an annual turnover of $75,000 or more a year
- Not-for-profit organizations with a yearly turnover of over $150,000
- All taxi and ride-sharing drivers, irrespective of their yearly turnovers
If you do not register for the GST tax when you should, it may land you in some legal trouble. If your annual turnover doesn’t meet the required one, the law allows you to register for the tax and enjoy the benefits voluntarily. With these benefits also come some responsibilities that you will have to take on. You may want to weigh your options.
Benefits of registering for GST
The Goods and Services Tax has several advantages, especially for small businesses in Australia. Let’s have a quick rundown of some of the benefits:
- GST will help curb the “tax on tax” effect on business. GST is a comprehensive indirect tax seeking to bring all indirect taxes under a uniform system.
- The turnover threshold for the GST tax is much higher than other taxes such as the VAT. That means that unless small businesses voluntarily register for GST, they are not obligated to do so.
- Small businesses can also benefit from lower taxes if they register for the GST.
- The GST registration process is easy. You can register and fill out return forms online without needing to stand in a long queue in an office.
- The GST also defines the treatment of e-commerce operators. The tax clearly states provisions that regard e-commerce and trading compliances.
- The Goods and Services Tax reduces the restrictions to move between states and regions. That was not the case under VAT and the service tax. That makes it easier for goods and service providers to trade across state lines.
What do I need to register?
To register for the goods and services tax, you need an Australian Business Number (ABN). That means you must have registered your business. For companies, you will need an ACN (Australian Company Number) before applying for an ABN.
When to register for GST
Should your newly created business be registered for GST? The answer depends on what you hope to achieve in the first year. If you project that your newly created business would reach a turnover of $75,000 in its first year of operations, then you should register for GST. The law gives you a 21 days window to register for the goods and services tax after learning that your business will meet or surpass the $75,000 threshold. Make sure to reach your turnover regularly.
You may want to voluntarily register for the GST even if your turnover is below $75,000. If you choose to do this, you must do the following:
- Claim GST credits for most business transactions you make
- Include GST in the prices of your goods and services
- Lodge activity statements to report your total sales, GST credits, and GST sales
How to register for GST
There are several ways to register for the GST, the easiest of them being to register online. Before registering, make sure you have an ACN and ABN. You can register on the Business registration service, the ATO business portal, or NAT 2954. Below is a complete guide to writing for GST through the Business portal.
Step 1: log in to the ATO business portal. You can access the site using your myGovID or your RAM (Relationship Authorization Manager).
Step 2: click on the menu tab and then go to Business Registration details
Step 3: choose the registrations radio button and then click next
Step 4: Click on “Activity Stmnt” and then select “Add tax type”
Step 5: Select the type of tax you want to register for, the GST, and click next.
Step 6: fill in the required information, and then you are done.
Once you have registered
After registering, the process doesn’t exactly end there. There are still a few more things you have to do. You will be obligated to do the following:
- Pay any GST due
- Add good and service tax to your prices
- Keep receipts and invoices so you can claim GST on your business expenses
- Submit BAS (Business Activity Statements) to the Australian Tax Office
- Issue tax invoices to your customers
Some third-party businesses and websites will help you register for the Goods and Services Tax, but the process of registering is so easy that you may not need extra help. Remember that once your turnover reaches and surpasses the $75,000 threshold, you have 21 days to register for the GST and avoid legal trouble. You may also voluntarily register for the goods and services tax even though your turnover hasn’t reached $75,000. Just be ready to meet the requirements for registrations. We hope this article has been helpful. See frequently asked questions below for information that we may not have touched on above.
GST Frequently Asked Questions
Should I register for GST?
If you expect an annual turnover of over $75,000 a year, you must register for the GST. There’s no way around it. Registering for GST is only optional if your turnover doesn’t reach the threshold, but you will be mandated to register once it does.
How do I register for GST as a sole trader?
For sole traders, you can register using your Australian Business Number. Since you are not a company, you may not have an ACN. You can choose to register for GST directly through the ATO Business Portal or request that your account does the registration on your behalf. Should you decide to register by yourself, follow the steps listed above.
How much does it cost to register for GST?
Registering for the Goods and Services Tax in Australia is free. But if you are using a third-party company, you would be charged about $70+ for their services. We suggest you follow the steps we have listed above and register for the tax but if you prefer to get some help from a third party, then go right ahead.
Can I charge GST if not registered?
If you have not registered, you cannot charge GST on your goods and services. Your invoice can also not say “tax invoice.” Instead of claiming GST on your invoices, you can claim total business expenses.
What is excluded from GST in Australia?
There are some goods and services that are considered exempt from the GST in Australia. They include essential foods, health care products and services, medical products, and educational courses.