Understanding and managing the Goods and Services Tax (GST) is crucial for businesses operating in Australia.
GST, set at a rate of 10%, applies to most goods, services, and items sold or consumed in the country. If your business is GST-registered, it becomes your responsibility to collect an extra 10% from your customers and remit it to the Australian Taxation Office (ATO).
Who Needs to Register for GST?
Businesses with a GST turnover of $75,000 or more, non-profit organizations with a turnover of $150,000 or more, providers of taxi or limousine travel, and those claiming fuel tax credits must register for GST.
GST Concessions for Small Businesses
For businesses with an aggregated turnover of less than $10 million, several GST concessions are available, making compliance more manageable.
When to Register and How to Stay Compliant
If you’ve recently started a business, register for GST if you anticipate reaching a $75,000 turnover in the first year. Registration must occur within 21 days of realising you will exceed the threshold. Monthly checks are advisable to ensure compliance.
Even if your turnover is below $75,000, voluntary registration requires including GST in your prices, claiming GST credits for business purchases, and filing activity statements regularly.
Special Considerations for GST Accounting
- Cash Basis Accounting: Account for GST and claim credits based on when you receive payment or pay a supplier, not when invoices are received.
- Instalment Payments: Paying GST quarterly allows flexibility to adjust amounts based on your estimates or ATO assessments.
- Private Use of Purchases: If a business purchase serves both business and private purposes, claim a full GST credit and make a single adjustment for private use at the end of the income year (annual private apportionment).
ATO’s Red Flags for GST Compliance
The ATO closely monitors various factors, including turnover size, compliance history, lodgement patterns, and financial record alignment. Be vigilant about potential red flags to ensure seamless GST compliance.
Note that the following can be potential indicators to the ATO of something untoward:
- Size of turnover and GST liability.
- Notable deviations from previous GST lodgements.
- Previous compliance history.
- Repeatedly late lodgements, extension requests and late payments.
- Retail industries and those with high volumes of cash transactions.
- Property and other sectors involving large, complex transactions.
- Financial records that deviated from industry norms.
- Misalignments between income tax and GST records.
- The size and frequency of GST refunds.
Stay informed, stay compliant! If any questions arise, speak with your advisor.