Regardless of what kind of business you own in Australia, Goods and Services Tax (GST) is almost definitely going to impact you at some point in your career – as such, there’s a proper and improper way to handle your GST, and if you do it right, you’ll be able to save your company:
- Time
- Money
- Potential legal complications with the ATO
Understanding GST Registration Requirements
Firstly, it’s not up for debate whether you should or shouldn’t register for GST if your business’s annual turnover is higher than $75,000 (that threshold is $150,000 for non-profit organisations).
You don’t have to register if your turnover is below that threshold, but we’d still recommend doing it anyway as you’ll be able to claim credits if you incur a good amount of GST on any business purchases.
Maintain Accurate Records
As it is for pretty much every tax, it’s imperative you’ve got fully up-to-date records on all of your books (including all sales and purchases, essentially every transaction).
Given the importance of this one, we’d suggest using some form of accounting software like Xero so you’re able to not only streamline the process but reduce your errors, too – errors are costly, so make sure you’re doing yourself a favour here.
Know What is Taxable and What Isn’t
Not all goods and services actually attract GST so you’ll want to familiarise yourself with what is GST-free or input-taxed. As a general rule of thumb, some of the more common items that are GST-free include things like:
- Basic food
- Some education courses
- Medical services
Again, it’s vital you’ve got an understanding of this distinction so you can prevent accidentally ever applying GST on your products or services.
Invoice Correctly
This might be a simple one, but just make sure you’re actually issuing your invoices correctly so that they’re GST-compliant. This means your tax invoices need to include:
- The seller’s identity and ABN
- The date
- A description of the items that have been sold
- The GST amount (if any)
- And clearly state that GST is included if it is
Claiming GST Credits
As touched on earlier, only a registered business can claim GST credits for the GST that’s included in the price of your business purchases – just make sure that you’ve got valid tax invoices for all of these purchases and that they relate directly to your business operations.