Running a small business in Australia involves various financial responsibilities, and understanding the Goods and Services Tax (GST) is one of the most crucial. While GST can initially appear complex, the right guidance can make it straightforward and manageable, helping you stay compliant with the Australian Taxation Office (ATO).
This guide breaks down the essentials of GST, including who needs to register, key obligations, how a small business bookkeeper can help you meet record-keeping requirements for GST, and practical tips for managing it with confidence and ease.
By the end, you’ll clearly understand how GST affects your business and be well-prepared to meet your tax responsibilities.
What is GST and How Does It Impact Small Businesses?
The Goods and Services Tax (GST) is a 10% tax applied to most goods and services sold in Australia. For small businesses, understanding GST involves knowing when to register, how to charge it, when to pay it, and how to claim credits on business expenses. Essentially, GST is a value-added tax that’s applied at each stage of the supply chain.
GST becomes mandatory for small businesses once your annual turnover exceeds $75,000. At that point, you must register for GST, start charging your customers an additional 10% on your products or services, and report this to the Australian Taxation Office (ATO). The good news is that you are also entitled to claim back the GST paid on business-related purchases. Staying on top of your Business Activity Statement (BAS) lodgements is key to ensuring compliance and maximising your GST credits.
What are the Record-Keeping Requirements for GST?
You must pay attention to maintaining records to show expenses and income used to support and calculate the amount you report and claim for GST credits. Generally, this includes all tax invoices, sales, and other GST-related transactions, expenses, fees, wages, and any other business expenses. You can reach out to a bookkeeper in Melbourne to record and keep records for GST purposes. You must safely store any other documents that track adjustments, decisions, or calculations made for GST. If your records don’t support your claims, the ATO may deny or adjust some claims, so it’s essential to maintain records accurately and make accurate calculations.
It is suggested to keep your GST in a separate ledger account to make your calculations and record-keeping easier. You are not required to keep a tax invoice to claim GST credits for taxable imports. However, you need to have accurate documents from the Department of Home Affairs to meet the record-keeping requirements, as they will show the GST amount you paid on those imports. If you run a ride-sourcing organisation, there are some additional record-keeping requirements to support the sharing economy.
Your GST Responsibilities: What You Need to Do
If you operate a business or enterprise with a GST turnover of $75,000 or more (or $150,000 or more for non-profit organisations), or if you provide taxi or ride-sourcing services, you are required to:
- Register for GST with the Australian Taxation Office (ATO).
- Determine whether your sales are taxable, meaning they attract GST (as opposed to being GST-free or input-taxed), and include GST in the price of those sales.
- Issue tax invoices for your taxable sales and ensure you obtain tax invoices for your business-related purchases.
- Claim GST credits for the GST included in the cost of your business expenses.
- Choose an accounting method (cash or accrual) and set aside the GST collected to ensure it’s available when it’s time to pay.
- Lodge Business Activity Statements (BAS) or annual GST returns to report your sales and purchases, and either pay GST owed or receive a refund if you are entitled to one. To deal with any type of tax matter, it’s recommended to get help from a reliable accountant. When searching online for a ‘tax accountant near me’, make sure to check how many clients they have dealt with.
Conclusion
As a business owner, you must be aware of all types of tax obligations to avoid penalties or fines from the ATO. This blog post covers the most common GST rules that every business or organisation needs to follow. From lodging taxes to supporting any claim, you need accurate records, and here, reliable bookkeeping services can help you.