GST sounds like a simple enough concept: businesses are required to pay 10% tax on most of the good and services they sell in Australia and include this amount in the sale price, thus passing the tax onto the consumer.
However, in reality GST is an incredibly complex series of compliance requirements, especially for small business owners. One of the more confusing parts of GST compliance is knowing whether or not your business should be registered for GST. We have compiled this guide to help small businesses understand whether or not they should be registered for GST.
Who is required to register for GST?
Some businesses have to be registered for GST. If your GST turnover is over $75 000, or you provide taxi travel in exchange for payment, then you must be registered for GST.
GST turnover is calculated by deducting GST from your gross business income for the twelve month period leading up to the current month, or the same calculation applied to your projected earnings for the next twelve month period starting in the current month. If your turnover is edging towards this threshold, you should be checking each month because once you have exceeded it you must register within 21 days.
Voluntarily registering for GST
Some business register for GST voluntarily.
One reason for this may be that they are anticipating reaching the $75 000 threshold. Another reason is that if you are registered for GST you can claim GST credits on purchases that you have made for your business.
Therefore, if your business primarily sells to other businesses who are registered for GST, then the additional cost in your sale prices will not actually have a significant impact on total sales, and you will be able to claim credits on GST you would have had to pay regardless.
Cancelling your GST registration
If your GST turnover drops below $75 000, it may seem like a good idea to cancel your GST registration to save on paperwork.
However, this can mean that you actually end up owing the ATO retrospective GST on high-value assets that you have purchased in the ten-year period prior to cancelling the registration.
If you are cancelling your GST registration due to a drop in revenue then you will need to include a portion of the GST you claimed on these assets and repay it to the ATO in your final BAS.
Calculating these amounts is very complicated, and there are different amounts of GST payable on different assets, dependent on the value of the asset and how long it was held. It is advisable to seek professional advice if you are considering cancelling your GST registration.