Updated: Jun 28
GST, or Goods and Services Tax, is a 10% tax on most (but not all) goods and services sold or consumed in Australia. Ultimately, consumers are the ones who end up paying GST, but it’s up to businesses providing goods and services to tax those consumers appropriately, then pass those earnings on to the ATO.
It is compulsory to register your business for GST once your turnover (sales, fees received etc) reaches $75,000. Prior to this turnover amount registration is voluntary. Which begs the question. Why would you register your business for GST if you don’t need to?
If you’re dealing with large organisations, or engaging in government contracts, you may want to appear to be more established than you really are. If you’re not registered for GST it’s apparent to other organisations that your turnover is less than $75,000 pa. Hence, they may be hesitant to work with you until you are more established.
If you are required to lodge your activity statement associated with GST every quarter you really need to have your business’s paperwork up-to-date. It’s a major headache for you (and your accountant) to play catch-up with documentation months down the track. At any point in time you need to know how your business is going. You may think you’re doing well because you’re busy, but the reality may be something entirely different. Until you see it all on paper you may be looking through rose-coloured glasses.
If you have been outlaying large sums for expenses that are subject to GST you are able to recover these GST amounts on a regular basis (generally quarterly). This, in turn, helps your cash flow.
No Surprises for Customers
If you register for GST once your business reaches turnover of $75,000, you are either going to increase your prices by 10% to cover the GST or keep the prices as they and lose that extra 10% in income.
The other side of Voluntary Registration is that there are additional administrative tasks involved with the preparation and lodgment of the relevant paperwork with the ATO. You need to weigh this up with the advantages of registering earlier than required. Every business is different and what it best for others won’t necessarily be best for you.
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