Goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia.
Generally, businesses and other organisations registered for GST will:
- include GST in the price of sales to their customers, and
- claim credits for the GST included in the price of their business purchases.
So while GST is paid at each step in the supply chain, businesses do not actually bear the economic cost of the tax. The cost of GST is borne by the final consumer, who can’t claim GST credits.
While businesses don’t bear the economic cost of GST, they collect it. As a GST registered business, you’ll need to put aside the GST you have collected so it can be paid when due.
If you carry on an enterprise and have a GST turnover of $75,000 or more ($150,000 or more for non-profit organisations), or provide taxi travel, you must:
- register for GST
- work out whether your sales are taxable (that is, subject to GST, GST-free or input taxed)
- include GST in the price of your taxable sales
- issue tax invoices for your taxable sales obtain tax invoices for your business purchases that have GST included in the price
- account for GST on either a cash or non-cash basis
- report sales and purchases by lodging activity statements (even if the amount to be reported is zero), work out whether they have any adjustments and pay GST to ATO.
GST-registered organisations can also claim GST credits for GST included in the price of most business purchases. If you are not registered or required to be registered for GST, you don’t include GST in the price of your sales and you can’t claim credits for any GST included in the price of your purchases, even if they are for your business. But if you can claim the business expense as an income tax deduction, you can claim the entire expense, including GST, on your income tax return.
If your GST turnover falls below the registration threshold, you can choose to cancel your GST registration. You must cancel your GST registration if you are not carrying on an enterprise. You may also be required to cancel your GST registration if your structure changes (for example, a partnership change).
Your GST turnover is your gross business income (not your profit), excluding any:
- GST you included in sales to your customers
- sales that are not for payment and are not taxable (for example, some sales to associates)
- sales not connected with an enterprise you carry on
- input taxed sales you make
- sales not connected with Australia.
If you are not registered for GST, you must check each month to see whether you have reached the GST turnover threshold. You must register within 21 days of reaching the threshold.
You reach the GST turnover threshold if either:
- your turnover for the current month and the previous 11 months is $75,000 ($150,000 for non-profit organisations) or more (current GST turnover), or
- Your turnover for the current month and the next 11 months is likely to be $75,000 ($150,000 for non-profit organisations) or more (projected GST turnover).
In working out your projected GST turnover, don’t include amounts you received for the sale of a business asset (such as the sale of a capital asset) or for any sale you made, or are likely to make, solely as a consequence of ceasing or substantially and permanently reducing the size of your business.