For something that is involved in our everyday lives as consumers, it is something that we tend to understand very little about as business owners.
We have put together a great outline of the basics of GST and how it applies to you as a business owner.
What is GST?
In Australia, goods and services tax (GST) is charged on the supply of most goods, services and other things – for example, supplies of rights or the sale of certain property. The GST rate is set at 10%.
Who is supposed to charge GST?
Does your business have a GST turnover of $75,000 or more ($150,000 or more if it is a non-profit organisation) or do you provide taxi travel?
If so, you must:
- Register for GST
- Work out whether your sales are taxable, GST-free or input taxed
- Include GST in the price of your taxable sales
- Issue tax invoices for your taxable sales
- Obtain tax invoices for your business purchases that have GST included in their price
- Work out whether you have any adjustments
- Account for GST on a cash or non-cash basis
- Report your sales and purchases by lodging activity statements (even if the amount to be reported is zero) and pay GST
What if you do not register for GST?
If you are required to be registered, and do not do so, you will have to pay goods and services tax (GST) on the supplies you have made since the date you became required to be registered. This may apply even if you did not take account of the GST in the price of those supplies. Penalties and interest can also be imposed.
Also, if you do not register for GST you cannot claim input tax credits. This could result in the business costs being higher than those of their competitors. In addition, other businesses won’t be able to claim input tax credits for supplies they purchase from you.
How does the GST system work?
Generally, registered businesses:
- include GST in the price of sales to their customers
- claim credits for the GST included in the price of their business purchases.
- So while GST is paid at each step in the supply chain, businesses do not actually bear the economic cost of the tax. The cost of GST is borne by the final consumer who cannot claim GST credits.
Do you register for GST for every business you operate?
You register only once for GST, even if you operate more than one business. For example, the company ABC Pty Ltd operates two businesses, ABC Building and Hardware Supplies, and ABC Plumbers. ABC Pty Ltd registers once for GST. This registration covers the company’s two businesses.
If you need help with GST registration for your business, call us on 1800 distil (1800 347 845) or email sales@distil.com.au