To GST or Not to GST

That is the big question! If Shakespeare were alive today, he would probably be charging you GST on his theatre ticket sales.

“SO WHAT EXACTLY IS THIS GST?! I ONLY KNOW I HAVE TO PAY IT ON EVERYTHING I BUY! LIKE SHAKESPEARE’S TICKETS!”

Relax! Shakespeare is dead. Simply speaking, Goods & Services Tax (GST) is a tax imposed on most of the products/services sold in Australia. If you are running a business, you will probably be required to register for GST at some point.

Don’t worry, it is not as daunting as it seems. The team at Vivid Chartered Accountants is here to help!

We specialise in getting small businesses up and running, and we understand the whole process can be VERY overwhelming. One of the more commonly asked question by new start-ups is, “Should I register for GST?”

“I AM JUST A SMALL BUSINESS… DO I REALLY HAVE TO REGISTER FOR GST?”

The ATO doesn’t force everyone to register for GST. If your annual sales are over $75,000 ($150,000 for non-profit organisations), you are required by the ATO to register. However if you are below this threshold, you can elect to register if you wish to do so.

If you have a new business or expect your business activity to be relatively slow in the first few years, you can choose not to register for GST until you have crossed the threshold.

“OK, BUT HOW DO I REGISTER THEN? DO I CALL THE TAX OFFICE?”

If we helped you set up your business, we will always go through the GST discussion with you. If you do decide to go ahead with the registration or have crossed the threshold, let us know and we will organise the registration for you. We can even backdate it, if needed.

If you would like to register for GST yourself, there are two ways to go about it:

1. Phoning the ATO on 13 28 66 (be prepared for a long wait in the queue)

2. Online via the Business Portal.

“I AM A NEW BUSINESS AND CAN’T AFFORD ANOTHER TAX LIABILITY TO THE ATO!”

Don’t worry, GST really isn't that bad! Registering for GST simply means:

1. You collect GST from your customers and pay it to the ATO, so really you are just a middle man collecting tax for the ATO.

2. When you pay GST on your business purchases, you can claim the 10% GST back from the ATO. This means most of your expenses are effectively 10% cheaper!

So GST should never actually become an expense to your business unless you charge a fixed amount, in which case you might lose 10%.

“SEEMS LIKE A LOT OF WORK KEEPING A RECORD OF ALL THAT GST! HOW DO I MAINTAIN RECORDS THAT ARE ACCEPTED BY THE ATO?”

Easy! With the help of decent accounting software, you can maintain all your GST and financial records without any hassle! Combining cloud-based software like Xero & Receipt Bank, not only can you save HOURS of your precious time, it can also help maintain your records online and have all the information available at your fingertips! And it is ATO-compliant. No more fading receipts or stacks of paperwork. We also provide training to new businesses who need training with any of this software.

In short:

“WHAT IF I AM REGISTERED FOR GST AND WANT OUT?”

No worries! Cancelling your registration is easy. If you are below the ATO thresholds and had previously registered for GST, you can always opt out. Just give us a call and we can sort it out for you!

“AND HOW OFTEN DO I HAVE TO REPORT GST?”

GST reporting is usually done on a quarterly basis for small business, unless you elect to do so on a monthly or annual basis (usually available for businesses that are NOT required to be registered).

BASs are due to be lodged and paid within 28 days following the end of the quarter (or 21 days following the end of a month). The one exception to this is the December quarter BAS, which has an extended deadline (due to the Christmas holidays), of the 28th of February. The ATO does have a heart after all!

Watch out though! It is very easy to spend all your sales revenue on business and other expenses, and then not have the cash to pay for the GST liability. If you are registering for GST and charging clients/customers GST, it is good practice to set aside 10% of your sales revenue so you don’t end up with a cashflow shortage. Your GST liability can accumulate into a massive tax debt quickly, so setting aside money and keeping up-to-date with your quarterly GST lodgements is vital.

Speak to us about starting a GST and Tax Quarantine Plan so that you don’t get trapped by nasty ATO surprises ever again.

So if you are thinking of setting up a new business and need help with the start-up, give us a call or flick through an email and we will be in touch!

Until then….