Beginners Guide to GST in Australia
- Leonie Martin
- 3 days ago
- 4 min read
Your business must register for GST if your annual turnover reaches $75,000 or more. If your turnover is less than that, registration is optional, but it’s still something you can choose to do.
If your business is close to reaching the $75,000 threshold or if you’re already exceeding it, you must register for GST within 21 days.
Taxi and ride-sharing drivers are required to register for GST regardless of their turnover. For not-for-profit organisations, the registration threshold is higher, at $150,000 in annual turnover.
The ABR is the central hub for Australian business details, so in addition to registering for GST and getting an ABN, you can also apply for a business tax file number (TFN), pay-as-you-go (PAYG) withholding, and register your business name.
How does the GST work?
GST (Goods and Services Tax) is a 10% tax that applies to most goods and services sold in Australia. As a business owner, it's important to know whether you need to register for GST and how it affects your operations.
If your business has a turnover of $75,000 or more per year, you are required to register for GST. This includes any income you earn from selling goods or services. Once registered, you’ll need to charge GST on your sales and report it to the Australian Taxation Office (ATO) through a Business Activity Statement (BAS).
However, if your turnover is under $75,000, registration is optional. Some businesses, like those in the transport industry, may need to register regardless of their turnover.
Understanding whether to register for GST helps you stay compliant with tax laws and ensures your business runs smoothly financially.
GST Reporting
Businesses must report their GST regularly through a Business Activity Statement (BAS). The BAS details the GST you’ve collected from sales and the GST you’ve paid on business expenses. It also includes other tax obligations like income tax and PAYG withholding.
The frequency of reporting depends on your business’s turnover. If your business earns under $10 million annually, you’ll generally report GST on a quarterly basis. However, if your turnover exceeds this amount, you may need to report monthly or annually, depending on your situation.
Submitting your BAS on time is important to avoid penalties. You can lodge your BAS online through the ATO’s Business Portal or through your accountant. Regularly reviewing and submitting your BAS ensures you stay on top of your GST obligations and keep your business compliant with tax laws.
By tracking your GST regularly, you can manage your cash flow better and avoid any surprises at tax time. It also helps you claim back the GST on expenses you’ve paid, keeping your business finances healthy.
Accounting for GST
When your business makes a taxable sale over $82.50 (including GST), you must provide a tax invoice to your GST-registered customers if they request one. This is essential as it allows your customers to claim back the GST they’ve paid. If a customer asks for the invoice later, you have 28 days to provide it.
For sales over $1,000, the tax invoice must include specific details to be valid. This includes:
The words "Tax Invoice" clearly displayed.
Your business name and ABN (Australian Business Number).
The date of the invoice.
The buyer’s name and ABN or address.
A description of the goods or services sold, including quantity and price.
The GST amount or a note stating the total price includes GST.
For sales under $1,000, the buyer's details aren’t needed, but you must still include all other required information.
In short, having the right GST invoice ensures proper record-keeping and transparency in your business transactions, keeping things organized for both you and your customers.
Choosing the Right GST Accounting Method
When it comes to accounting for GST, businesses can choose between two methods: cash or accruals basis.
1. Cash Basis: Businesses with a turnover of under $10 million can choose the cash basis, which means GST is reported when payments are received or made. This method aligns your GST reporting with your cash flow, making it easier for small businesses to manage.
2. Accruals Basis: Businesses with a turnover of over $10 million must use the accruals method. Under this system, GST is reported when an invoice is issued or received, regardless of whether payment has been made or not.
Both methods are acceptable for smaller businesses, but the choice will depend on your cash flow needs and the complexity of your business operations. Keeping accurate records of all invoices and payments is essential for ensuring you report GST correctly and stay compliant.
GST and Income Tax Deductions
When claiming income tax deductions for business expenses, you must account for GST separately. For purchases that include GST, you can only claim the net amount—the price without GST—on your income tax return. This ensures you are not getting tax relief twice for the same expense (once via GST credits and again via income tax deductions).
However, if the purchase is input taxed (such as rent on residential property, financial services like loans, or sales of existing residential homes), you cannot claim back the GST. In these cases, you can claim the gross amount, including GST, as an income tax deduction.
Input taxed items don't include a GST component in the price, so there's no GST credit available. It's important to track which purchases are subject to GST and which are not to avoid errors when filing your taxes.
Conclusion: Understanding GST for Your Business
Knowing how GST works is essential for keeping your business on track and avoiding tax issues. From registering for GST to keeping accurate records and submitting your Business Activity Statements (BAS), understanding your responsibilities will help you stay organised and compliant. Managing GST isn’t just about taxes—it’s about making smart decisions that allow your business to grow while avoiding unnecessary mistakes.
It's important to know when to apply GST to your sales, how to claim GST credits for business expenses, and how to keep track of everything so you can stay in control. By handling your GST correctly, you ensure that your business stays financially healthy and ready for growth.
For more information on GST and how it affects your business, contact our team at HelloLedger. We specialise in helping small businesses manage their GST, bookkeeping, and overall financial health. Let us guide you through the process and take the stress out of your accounting. Contact us today to learn how we can help your business thrive!
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