Many small business owners find themselves asking this question at some point. And it's a good one!
Simply put, you must register for GST if: you run a business or other enterprise and your GST turnover is $75,000 or more (for non-profit organisations the threshold is $150,000 or more) or you are a taxi driver, regardless of your turnover.
Calculating Turnover
There are some exceptions, but small businesses must register for GST when the turnover (gross income less GST) reaches $75,000. There are two methods to calculate turnover.
When you project your income over the next 12 months will reach $75,000, you must register for GST from the start. This is called 'projected GST turnover'. The other method is 'current GST turnover' and is calculated as the total turnover for the previous 12 months (including the current month). GST turnover to calculate registration eligibility does not work on a financial year.
So, if you are starting your business, and reasonably project you will turnover $75,000 or more, you must register for GST. If you are not sure what your turnover will be, run a report each month. Once your turnover reaches $75,000 including the current month, you must register within 21 days of this.
If you want to claim fuel tax credits for your business or enterprise you must be registered for GST.
Backdating GST Registration
You can have your GST registration backdated to up to four years. You will need to lodge the BAS or annual GST statements for the backdated period. You will also need to pay GST on taxable supplies you have made. If you are planning to do this, seek advice from your accountant.
There may be other things you need to consider for your specific situation before you backdate your registration.
Invoicing When You Aren't Registered For GST
If you are not registered for GST, you must not use the words 'Tax Invoice'. A tax invoice indicates the supply is inclusive of GST. You must not include anywhere on the invoice a GST component for the supply.
There are rules about what is to be included on an invoice to a customer. These can be found here.
Your customers should be able to tell from your invoice that you are not registered for GST. You may choose to use the title 'Invoice'. There will be no GST included and many business owners choose to enter a comment on the invoice such as ‘Not Registered For GST’.
Invoicing When You Are Registered For GST
You must title your invoices 'Tax Invoice' if you are registered for GST. You must issue a tax invoice for all supplies of more than $82.50 including GST. There are seven pieces of information you must include for sales less than $1,000 and other information to include for sales greater than $1,000.
You must specify the GST amount on your invoices. If the GST amount is exactly 1/11th of the total, you can specify that the total amount is inclusive of GST.
Knowing What To Claim On Purchases
If you are not registered for GST, you can claim the total purchase price of a business expense inclusive of GST as the business deduction, to the extent the purchase was used by your business.
For example, Fixit Works is not registered for GST. They are claiming telephone costs for the financial year of $1,000 + GST = $1,100. This telephone was used 100% by the business (no personal use), so Fixit Works can claim $1,100 as a business deduction.
Lodging GST
You may elect to lodge your GST return annually if your turnover is less than $2M and you have elected to register for GST. If you are a business that must register for GST, you are not allowed to report and lodge an annual return.
If your turnover is less than $20M and the ATO have not advised otherwise, you must pay your GST quarterly. You can pay a quarterly instalment and lodge an annual report in some cases. Your accountant is able to provide you with specific advice regarding your options.
Registering For GST
You must have an ABN to register for GST. You can register via the business portal or through a BAS agent. Downloadable forms are also available through the ATO website. Once registered, you will receive a notification and GST registration number.