Commercial Calculations: A Small Business Guide to GST
The Goods and Services Tax in Australia is an essential source of revenue for the government. As a small business owner, it is essential that you collect and calculate GST accurately to comply with existing legislation. In doing so, you will be playing your part to ensure that Australia’s public services are supported and that the quality of life for all Australians is improved.
It can be confusing collecting and calculating GST for the first time, however. Let’s look at some of the essential things that you need to know about GST as a small business owner in Australia.
Know if you need to pay
If you are just starting out as a small business in Australia, then one of the first things you need to determine is whether or not GST actually applies to your business. Usually, the important thing to keep in mind is your annual turnover, gross income minus the GST that you would charge. If this your annual turnover is greater than $75,000, then you will need to apply GST to your goods and services. This rate is doubled to $150,000 for non-profit organisations.
There are some important exceptions too. Taxi, limousine, and ride-sharing drivers will need to apply GST to the price of their services in all cases. Any businesses that want to claim fuel tax credits will also need to charge GST regardless of their annual turnover.
Of course, you can also register for GST on a voluntary basis. There are benefits from doing so, and it is worth exploring these on the ATO’s website.
How to register for GST?
It is straightforward to register for GST as an Australian business. You will need to have an Australian Business Number (ABN), which you may already have if you have been operating in the country for a while. Once you have your ABN, then you can register for GST yourself through the ATO’s online Business Portal, by calling the ATO, or through a registered tax agent.
Calculate the right rate.
There are many helpful calculators and tools available online that will help you determine your new prices, with GST included. However, the calculation is easy enough to do on your own. Simply multiplying your prices by 1.1 will give you the correct amount to charge. The GST rate is set at 10% at present, which makes it straightforward to add. However, be mindful of any changes to this rate in the future.
Some goods do not require GST.
There are important categories of goods and services that are not intended to have GST added to their prices. Since these goods are often essentials and household basics, it is important not to charge more than you need to if you are involved in selling them. Consult with the ATO’s comprehensive list on their website for a better sense of the scope of these exemptions. Generally speaking, these goods are essential food items, some health services, and exports.
Know the penalties for non-registration.
Adding GST to your goods and services for the first time can be a hassle. The administrative burden of figuring out how to calculate GST and when to apply it can be demanding. As such, you may feel that it is something that you can get away with not doing. However, there are penalties for not collecting GST when you are obligated to do so. For example, you may be retroactively charged for the GST that you should have collected from the point when you should have registered.
Make sure to stay on top of your annual turnover and know when you need to be collecting GST.
Collect and calculate with care.
Adding GST to your prices for the first time can be mentally taxing as well. However, it is important to be diligent with these tasks. GST is an important revenue source for the Australian government, and it is your obligation as a small business to collect it. Make sure to fully understand how the GST process works if you are, or will soon become, a business that needs to collect GST.