Taxation has spurred revolutions and revolts throughout the world. Though often viewed as unfair or unreasonable, taxes have become the cornerstone of developed economies around the world. Whether you agree that they are the “dues we pay for the privileges of membership in an organised society” or not, as a business owner in Australia, you are required to pay them. So, understanding how they work is essential.
Understanding how the goods and services tax works will set you on the right path for keeping your business in compliance with tax law. The Australian Taxation Office has several guidelines for calculating GST and for which businesses need to collect and pay this tax. Knowing these guidelines will help you avoid trouble and mistakes as you grow your business in Australia.
Let’s look at what GST is in Australia and how it affects you as a business owner.
What Is GST?
The goods and services tax in Australia is similar to other value-added taxes that are common in developed economies. The GST in Australia is a ten per cent tax on most goods and services sales. Many essential items are exempt from GST, however. And, as a business owner, you need to be aware of what goods and services are exempt so that you do not apply the tax to the wrong items.
When Do I Need To Charge GST?
In Australia, GST needs to be charged if your business brings in an annual turnover of $75,000 or more. If your turnover falls short of this threshold, then you can choose to register for GST voluntarily. However, you will not be required to do so. For non-profit businesses, the threshold for mandatory GST enrollment is doubled and set at $150,000.
New business owners need to think about GST carefully. If you expect that your business will exceed the GST threshold in your first year of operation, even if you have not done so, then you will need to register for GST.
There are some exceptions to these rules. Taxi-based businesses, including ride-sharing services and limousine services, need to charge and register for GST regardless of their annual turnover. If you intend to collect Australia’s fuel tax credits for your business, then you will also need to register for GST regardless of your turnover.
How Do I Calculate My Annual Turnover?
While it might seem like a straightforward sum, calculating annual turnover involves a few special considerations. Your turnover will be your total business income minus charged GST, non-taxable sales, input-taxed sales, and non-Australian sales.
How Do I Register For GST?
Fortunately, registering for GST in Australia is relatively straightforward, and there are several ways to do it. You can register online using the Australian Taxation Office’s business portal website. You can also register over the phone or through a registered tax agent.
What Happens If I Do Not Register?
Nothing good will happen if you fail to register and charge for GST when you are required to. The ATO will charge penalties and interest on any outstanding monies that are owed to them. When it comes to GST that you should have charged, you may end up having to pay an amount that is based on the goods and services you have sold since the date you were required to register. In effect, if you did not charge GST on these goods, you will have to pay the cost of the tax out of your own pocket.
Getting GST Right
These tips will help you understand the basics of GST in Australia. Review them as a new business owner to start out on the right track.