Basically, if your turnover (income) is $75,000 or more either in the last 12 months including this month or projected to reach this over the next 12 months including this month, you must be registered for GST. But what if your turnover is less than this? Well, you need to weigh up your options. Simply put, the GST you pay the ATO is the amount you have collected from your customers (10% on top of your sales) less the amount you have already paid to your suppliers (usually 10% included in many of your purchases).
Working example:
If you invoice $10,000 in sales and are registered for GST, you will charge $1000 on top of this in GST. If you pay $8,000 in purchases, of which contained $727 of GST, at the end of the quarter, you will have to pay the ATO $1000 – $727 = $273. Your business gets to keep the rest as you have already paid it with your purchases.
This amount is payable only if you are registered for GST. You don’t have to reach $75,000 to register. Many small businesses make the mistake of not registering before the $75,000 mark, but are still paying the GST which is included in their purchases anyway. They miss out on the offset against their sales.
Remember, there may be bookkeeping costs to factor into this if you decide to register for GST before you need to.
If you feel these costs can be offset by the saving you will make, why not? For more information check out www.ato.gov.au or contact the ATO.
