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GST for Small Business: The Basics

Even though GST has been with us for 20 years, it can be easy to forget what it means and how it applies when starting a new business. We sat down with one of ITP’s Business Professionals to talk about the basics of GST for small businesses.

The basics

Most goods and services in Australia are subject to 10% Goods and Services Tax, or GST. Here is a list of GST-free goods and services.

Businesses collect GST on behalf of the government whenever they sell goods and services and then pay this profit to the ATO. The government uses this money to pay for public services and infrastructure such as hospitals, roads and public schools.

It is important to know whether your business needs to register for GST.

When do you have to register for GST? 

You are required to register if you:

  • Run a business or enterprise with a yearly turnover of $75,000 or more
  • Run a not for profit organisation with a yearly turnover of $150,000 or more 
  • Are a taxi or rideshare driver, regardless of your income

You must register for GST within 21 days of meeting any of these circumstances. If you don’t fit any of these circumstances, registering for GST is optional. However, if you do choose to register, you generally must stay registered for at least 12 months. 

You can register online via the ATO business portal, by phone on 13 28 66 or through one of our Business Tax Professionals. Importantly, you will need an Australian Business Number, or ABN, to register. 

GST credits

If you pay GST on any items purchased for your business you can claim a GST credit. GST credits, or Input Tax Credits, are the GST you have incurred as a business expense to create your goods or services. You can claim GST credits for any purchases you make for your business that include GST in the sale price and purchases over $82.50 that have a tax invoice from the supplier (ensuring the supplier is registered for GST).

Note: You can’t claim credits for purchases that don’t include GST, such as bank fees or water bills or on private expenses, such as food or entertainment. 

Business Activity Statement (BAS)

Your BAS will help you report and pay your GST, pay as you go (PAYG) instalments, PAYG withholding tax and other taxes. The ATO will automatically send you a BAS when it’s time to lodge, or even better, one of our Business Professionals can lodge and take care of it for you. 

Lodging and paying your BAS is important to avoid penalties. Most businesses lodge quarterly, but how often you lodge will depend on your circumstances. 

  • Monthly (within 21 days of closing): if your GST turnover is $20 million or more
  • Quarterly: if your GST turnover is less than $20 million – and the ATO has not told you that you must report monthly
  • Annually: if you are voluntarily registered for GST and your GST turnover is under $75,000 or $150,000 for nonprofit

Note: Please keep all of your tax invoices, as you will also need to lodge a Business Activity Statement, or BAS, now that you are registered for GST.

These are only just the basics on GST and BAS. Still looking for extra help? ITP look after all size businesses and are experts in preparing GST and BAS. Reach out to your local ITP Business Professional today and book an appointment.