Not every business needs to register for GST but penalties may incur if you fail to register for GST when you are required to do so. If your business is required to get registered for GST, you have to do it within 21 days. You must have an Australian Business Number (ABN) before you register for standard GST. You can get detailed information about GST, how it works, and how it applies to businesses by reading this blog.
What is GST?
Goods and services tax (GST) is a tax of 10% on goods and services consumed or sold in Australia. If your business is registered for goods and services tax, you need to collect this extra money from your clients. When it’s due, you pay this amount to the Australian Taxation Office (ATO) .
How does GST work in Australia?
Not every business is required to register for GST. There are some conditions that businesses need to meet. You need to register for GST:
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When your business has a GST turnover of $75,000 or above.
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When you launch a new business and you expect that your turnover will reach the GST threshold in the first year of the new business.
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If your business already has reached the GST threshold.
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If your non-profit organisation reaches a GST turnover of $150,000 a year or above.
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When you give limousine or taxi travel for passengers irrespective of your GST turnover – it applies to owner-drivers and if you rent a taxi.
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If you want to access fuel tax credits for your business.
When is GST payable? If you meet any of the above-mentioned conditions, then you need to pay GST. If your business doesn’t meet any of the above-mentioned requirements, then it will be optional for you to register for GST.
What are GST credits and when you can claim GST credits?
You can claim GST money back from the Australian Taxation Office (ATO). If your business or enterprise is registered for GST, you might be able to claim back any GST included in the price of the goods you’ve purchased for your enterprise. These are known as GST credits.
You can claim GST credits if:
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You need to use your purchase partly or solely for your business, and the purchase won’t relate to making input-taxed supplies.
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Your purchase price included goods and services tax.
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You pay or are liable to pay for the goods you bought.
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You’ve tax invoices from your supplier.
When you claim GST credits, ensure your suppliers are registered for GST.
GST concessions for small businesses
A business with a total turnover of less than $10 million can get the following GST concessions:
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Cash basis accounting for GST
You can claim GST credits within the tax season when you pay or are paid by a supplier, rather than depending on when the invoices are received.
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Paying GST on an instalment basis
You can pay GST on an instalment basis each quarter. These depend on what you or Australian Taxation Office (ATO) estimate your GST liability to be. The amount can vary each quarter.
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If you purchase for private use as well
If you purchase for business use but partly use for private purposes as well, then you can:
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claim a full GST credit
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at the end of your income year, make a single adjustment to account for the private purpose percentage
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When you can’t claim a GST credit?
You can’t claim a GST credit:
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if your company is not registered for GST
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for purchases that don’t have GST included in the price
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for wages, you pay your staff
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if you don’t contain a valid tax invoice for purchases that are more than A$82.50 when you file your activity statement.
Conclusion
The blog discusses GST for businesses, when you can claim GST credit and when not. You can read the GST registration requirements carefully to know whether your business should register for GST or not. For more information on how GST applies to businesses, you can also contact Reliable Melbourne Accountants.