The Goods and Services Tax (GST) is a broad-based tax of 10% on most goods, services, and other items sold or consumed in the country. As a business owner, understanding how GST impacts your operations is crucial for compliance and effective financial management. This article provides an overview of the essentials of GST in the Australian business context.

What is GST?

GST is a value-added tax applied to most goods and services in Australia. It’s included in the price of items and collected by businesses on behalf of the Australian Taxation Office (ATO).

 Who Needs to Register for GST?
  • Turnover Threshold: Businesses with an annual turnover of $75,000 or more must register for GST. For non-profit organisations, the threshold is $150,000.
  • Voluntary Registration: Businesses with a turnover below these thresholds can choose to register for GST voluntarily.
Charging GST
  • Inclusive Pricing: GST is usually included in the price of items sold. The price displayed or quoted should be GST-inclusive.
  • Tax Invoices: For sales of more than $82.50 (including GST), you must provide a tax invoice to your customers.
Claiming GST Credits
  • Input Tax Credits: Businesses can claim credits for the GST included in the price of goods and services purchased for use in the business. This is known as an ‘input tax credit’ or ‘GST credit.’
Lodging BAS and Reporting GST
  • Business Activity Statement (BAS): Businesses registered for GST need to lodge a BAS monthly, quarterly, or annually. This statement reports your GST collected and paid and allows you to claim GST credits.
  • Payment: You pay the difference between GST collected and GST credits to the ATO. If your credits exceed the amount collected, you’ll receive a refund.
Accounting for GST
  1. Cash Accounting: Pay GST on sales when you receive payment and claim credits when you pay for purchases.
  2. Accrual Accounting: Pay GST on sales when you issue an invoice or receive payment, whichever is earlier, and claim credits when you receive a bill or make a payment, whichever is earlier.
GST-Exclusive and GST-Inclusive Prices
  • Calculating GST: To calculate the GST portion of a GST-inclusive price, divide the total price by 11. For GST-exclusive pricing, multiply by 0.1 (or 10%).
GST Exemptions
  • Certain goods and services like basic food, certain healthcare, educational courses, and exports are exempt from GST.
Managing GST in Business Operations
  • Record Keeping: Keep accurate records of all sales, purchases, and GST paid and collected.
  • Software Solutions: Utilise accounting software that can manage GST calculations and BAS lodgments.

GST is a fundamental part of operating a business in Australia. Understanding and managing your GST obligations ensures compliance with Australian tax laws and contributes to the smooth financial operation of your business. Regularly consulting with us can help navigate the complexities of GST, keeping your business compliant and financially healthy.