Goods & Services Tax (GST)

Goods and Services Tax (GST) is a tax of 10% in Australia on most goods, services, and other consumables. If you are a registered business, you need to charge GST on most goods and services you sell or supply. You must be a registered if your business turnover exceeds $75,000 per annum or $150,000 for a not-for-profit organization but you may elect for voluntary registration if you are below the threshold.

Likewise registered suppliers will include GST in the price of items you purchase from them for your business. You may be entitled to claim input tax credits from the ATO if you are registered for GST and the acquisitions are acquired for the purpose of carrying on your enterprise. Although the liability for paying GST rests with GST-registered entities, the end consumer bears the economic cost.

Some supplies will be GST free such as medical and educational services but you are still entitled to claim input tax credits for GST included in any purchases you made if you are a registered entity. For an input tax sale, such as providing residential rental accommodation, you do not charge GST on the sale of the goods or services to your customers and cannot claim input tax credits for the GST portion of your business expenses relating to the items acquired to make the supply.

The reporting periods for GST are called tax periods and can be quarterly or monthly. Quarterly tax periods are three months long, ending 30 September, 31 December, 31 March, and 30 June. Monthly tax periods end on the last day of each calendar month. Entities with an annual turnover of less than $20 million generally have quarterly tax periods, but can choose to have monthly tax periods. Entities with an annual turnover greater than $20 million are required to have monthly tax periods.

The rules for attributing GST payable and input tax credits to tax periods differ according to whether GST is accounted for on a cash or accrual basis. You can account for GST on a cash basis if you meet one of these requirements:

  • Are a small business with an annual turnover of less than $2 million. This includes the turnover of your related entities.
  • Are not running a business, but are carrying on an enterprise with a GST turnover of $2 million or less.
  • Account for income tax on a cash basis.
  • Carry on an enterprise the commissioner has determined can account for GST on a cash basis regardless of your GST turnover.
  • Are an endorsed charitable institution regardless of your GST turnover.
  • Are a trustee of an endorsed charitable fund, gift-deductible entity, or government school, regardless of your GST turnover.

If you are not registered for GST, you cannot include GST on anything you sell or provide. You also cannot claim back any GST included in the price you pay for goods or services used in your business.

FURTHER INFORMATION: For more information, see the GST guide for small business.

IMPORTANT DISCLAIMER: This article is published as a guide to clients and for their private information. This article does not constitute advice. Clients should not act solely on the basis of the material contained in this article. Items herein are general comments only and do not convey advice per se. Also changes in legislation may occur quickly. We therefore recommend that our formal advice be sought before acting in any of these areas.

 

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