1 July 2000 was the day the Goods and Services Tax (GST) was introduced to all Australians. This presented confusion to consumers, business owners and accountants alike with an endless list of GST dos and don’ts.
In a nutshell, GST is a tax we pay via the items that we buy. As a simple example, if we purchase a $11 object, 10% of the amount goes to the government via GST. As a business owner, your job is to collect the $1 from your customers and pay it to the ATO.
Do you need to be registered for GST?
As a business owner, if you are in any of the below situations, you will need to register for GST:
- Your business has turnover of $75,000 or more during the past 12 months.
- If you are a new business, you expect sales income to reach $75,000 in the first year.
- If your business is a not-for-profit entity, the GST threshold increases to $150,000.
- You provide taxi or ride share travel for passengers. In this case you are required to register for GST regardless of your turnover.
- You want to claim Fuel Tax Credits for your business (this would be a business that uses fuel in machinery, heavy vehicles or light vehicles travelling off public roads).
If you don’t fit in any of the categories above, you can still elect to register for GST.
How to register for GST
There are two ways to register for GST. The easiest way is to contact your accountant and ask them to do it for you. It is a straightforward process for them to undertake on your behalf.
If you prefer to do it yourself, you can register by:
- Visiting the ATO via online services page: https://www.ato.gov.au/general/online-services/businesses
- Calling the ATO on 13 28 66
- Completing form NAT 2954
When registering for GST, you will need to make sure you have the following information with you:
- Your business turnover for the past 12 months.
- Your preferred lodgement cycle (monthly, quarterly, annually). Annual cycles are only available if you voluntarily registered for GST. If your turnover exceeds $20m, then you can only lodge monthly. The majority of businesses report quarterly.
- Your preferred GST accounting method, cash or accrual. Cash means you only need to report the GST when cash is physically paid or received. When use the accruals basis, you will be required to report GST based on the invoice date. Cash is a little easier to calculate and does suit cashflow a little better, but accruals does have advantages – such as potentially receiving GST back on purchases before cash is physically paid.
- Your business turnover for the past 12 months.
What happens next?
Firstly, all your sales are now subject to GST, unless you provide services free from GST including medical services, international sales, fresh fruit and vegetables. You will now need to add GST to all your sales and update your invoices and receipts to reflect the GST component.
You can now also claim GST credits on your business purchases. To claim GST credits, you will need to keep your invoices and receipts (electronic preferred) if the purchase was over $82.50.
Depending on your GST lodgement cycle, you will need to submit a Business Activity Statement (BAS) each month or quarter. This calculates your net GST payable or refundable (GST on sales less GST on purchases).
Some accounting software programs such as Xero will keep track of your accounting records and receipts. Xero will prefill all your BAS information and allow you lodge directly to the ATO. Your BAS will include payroll information if you have employees and a tax instalment if you are required to prepay your tax.
How to lodge your BAS with the ATO
Your accountant can prepare and lodge your BAS on your behalf for a fee. Your accountant will review your transactions, reconcile your GST position to your balance sheet, complete the BAS forms and send to you to sign with details on when and how to pay. One of the advantages of having a Tax or BAS agent prepare your BAS is that you’ll get an extra 28 days to lodge and pay.
If you have already established you would rather complete this yourself, you can lodge by:
- ATO online services.
- Some accounting software programs such as Xero.
- By paper. If you elect to do via paper, the ATO will send you out the form to complete each BAS cycle.
What if I make an error?
If you make an error when completing your BAS, you can include the adjustment in your next BAS. There is a time limit on correcting errors so if you do need to make a GST adjustment, just make sure you do it as soon as reasonably possible.
If you aren’t able to make the adjustment in the next BAS, you can go back an amend the incorrect BAS. If you lodge via online services, you can click through to your activity statements and click “revise”. If you lodge via paper, you will need to call the ATO and request a revision form.
If you are looking to register your business for GST or need help lodging a BAS, contact your Arabon accountant today.