Do you know when you need to register for GST?

Registering for GST (goods and services tax) is not an option for big business. But for small business owners and tradies, it depends on your annual turnover – and there are pros and cons.

What is GST?

GST is a broad-based 10% tax on most goods and services sold or consumed in Australia. Exceptions include basic foods, education and health, precious metals, farmland and exports, along with the sale of businesses as going concerns.

According to the Australian Taxation Office (ATO), you must register for GST if your business has an annual turnover of $75,000 or more. If your non-profit organisation’s turnover is $150,000 per year or more, if you provide taxi or limousine travel, or if you wish to claim fuel tax credits then you need to register as well.

How to register for GST

It’s possible to register for GST at any time, provided you have an Australian business number (ABN). GST registration can be done online at the ATO’s Business Portal, via phone or through a registered tax agent.

The ATO suggests business owners check each month to see if the threshold for GST registration has been reached. If it has, you have 21 days to register, otherwise you may have to pay GST on sales made since the date you became required to register – even if you didn’t include GST in those prices. There’s also the risk of penalties and interest.

Benefits of GST registration

For small businesses, GST registration can provide a boost to credibility. Some businesses prefer to buy from GST-registered businesses so they can claim the GST credit. This requires a tax invoice from the seller clearly stating the GST payable.

There are also cash flow benefits in charging GST. You’ll be collecting an additional 10% on sales that don’t need to be paid until quarterly business activity statements (BAS) are due.

You can also claim GST credits on anything bought for use in your business, such as petrol or phone costs. If the GST credits exceed your GST liability, you’ll be entitled to a GST refund for the difference.

Cons of GST registration

For businesses under the $75,000 turnover threshold, not registering will automatically make your sale prices 10% cheaper than competitors.

Registering for GST also means extra paperwork, such as calculating all the GST credits and charges each quarter. However, doing so will also give you more information on the financial health of your business.

For most small business owners and tradies, registering for GST is a sign of confidence in your business’s future success, but it’s not mandatory.