A Guide to GST and How it Applies to Your Business

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What is the goods and services tax (GST)?

The goods and services tax (GST) is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Businesses collect GST for the government whenever they sell products and services and pay this revenue to the Australian Tax Office (ATO). The government then distributes this money to our states and territories to pay for public services and infrastructure, such as hospitals, roads and public schools.    

The GST was introduced on 1 July 2000 and replaced a range of state and federal taxes, duties and levies. GST is ultimately paid by consumers who are the end users of these goods and services.

What does GST apply to?

Most products and services sold or consumed in Australia are subject to 10% GST.  

What products or services are exempt from GST?

Most basic foods, some education courses, and some medical, health and care products are exempt from GST. If you’re exporting and unsure whether you should be charging GST on your sales, speak to your business activity statement (BAS) agent or accountant.

The sale of a business as a going concern is GST-free if:  

  • Prior to the sale, the buyer and seller agree in writing that the sale is of a going concern.
  • Everything necessary for the business’s continued operations is supplied to the buyer.
  • The seller carries on the business until the settlement date.
  • The buyer is registered for GST.
  • Payment is made for the sale.

Unless all of these conditions apply, the sale of a business may be subject to GST. You should always speak with your accountant and solicitor prior to entering a sale transaction for advice specific to your situation.

Are exports exempt from GST?

Exports of goods from Australia are generally GST-free, so long as they’re exported from Australia within 60 days of the supplier issuing an invoice for the goods or receiving any payment for those goods.

Exports of services are usually GST-free if the recipient of that service is outside Australia.

There are specific rules that determine whether an export sale is GST-free; it’s best to speak with your accountant or the ATO on 13 72 26 regarding your specific circumstances.  

Do I need to register my business for GST?

You must register for GST if:

  • Your annual business income is $75,000 or more a year, or $150,000 or more for not-for-profit organisations.
  • You provide taxi travel (transporting passengers by taxi or limousine for a fare) as part of your business.
  • You want to claim fuel tax credits.

If your annual business income is less than $75,000 (or $150,000 for not-for-profit organisations), you don’t need to register for GST, but you can do so if you choose.

Once you’re registered for GST, you can claim back the GST you pay on the goods and services you buy for your business (so long as you have a tax invoice from the supplier).

How do I register for GST?

You can register for GST online, by phone on 13 28 66 or via a registered tax or BAS agent. You’ll need an Australian Business Number (ABN), and you must register for GST within 21 days of your GST turnover reaching the threshold (an annual business income of $75,000 or more a year for standard businesses or $150,000 or more for not-for-profit organisations).

I’ve registered for GST — now what?

If your business is registered for GST, you need to:

  • Include GST in the price of sales to your customers.
  • Claim credits for the GST included in the price of goods and services you buy for your business.

If you’re registered for GST, your customers must pay you the cost of your goods and services, plus an extra 10% (the GST component). If GST applies, you should always include GST in the price of your sale.  

Businesses that charge GST must send the GST amount to the Australian Taxation Office (ATO). Depending on your business’s GST turnover, you may be required to transfer the GST amount to the ATO monthly, quarterly or annually.   

How do I pay GST to the ATO?

Your GST reporting and payment cycle depends on your annual turnover.

  • If your GST turnover is $20 million or more, you’re required to report and pay GST monthly. You can use one of two reporting methods — the full reporting method or the simpler BAS reporting method. (If your GST turnover is $10 million or more, you’ll need to use the full reporting method.)   

  • If your GST turnover is less than $20 million and the ATO hasn’t asked you to report GST monthly, you can report and pay GST each quarter. If you pay GST quarterly, you can use one of three reporting methods — the full reporting method, the simpler BAS reporting method or the GST instalments method.

  • If you’re registered for GST, but your GST turnover is less than $75,000 (or under $150,000 for not-for-profit organisations), you can elect to report and pay GST annually. You don’t need to report or pay any GST during the year but must do so at the end of each financial year using the simpler BAS reporting method.

Once you’re registered for GST, the ATO will send you a business activity statement (BAS) to complete. Your BAS will help you to report and pay your GST, any pay as you go PAYG instalments and other taxes. You must lodge and pay your BAS on time to avoid penalties; if you’re likely to miss the due date, you should contact the ATO on 13 72 26 as soon as possible.

What’s the simpler BAS reporting method?

Lodging BAS this way makes your bookkeeping, BAS preparation and lodgement quicker and easier.

  • There are fewer GST classifications codes.
  • Purchases with both GST taxable and non-taxable items can be captured as a single bookkeeping entry.
  • You don’t need to split purchases into capital and non-capital components.
  • Accounting software set-up and automation is simpler.

To be eligible to submit your BAS using the simpler BAS reporting method, your business must have a GST turnover of less than $10 million.

What’s the full reporting method?

The full reporting method requires that you calculate, report and pay your GST amounts monthly. Businesses with a GST turnover above $10 million must lodge and pay their BAS using this method, which requires more detailed information to be included on your BAS, including:

  • Total sales
  • Export sales
  • Other GST-free sales
  • Capital purchases
  • Non-capital purchases
  • GST on sales
  • GST on purchases

If you have wine equalisation tax (WET), luxury car tax (LCT) or fuel tax credit (FTC) obligations or entitlements, you must also report these amounts each month.

What’s the GST instalments method?

The GST instalments method allows you to pay your GST quarterly but report annually. You can choose to use this reporting method if you meet the eligibility requirements — it’s best to contact the ATO directly on 13 72 26 to check if you qualify.   

When is my BAS due?

The due date for lodging and paying your BAS will be displayed on your BAS statement. If you report monthly, the due date is usually the 21st day of the month following the end of the taxable period. If you report quarterly, the due date for each quarter is usually as follows:

  • Quarter 1 (July, August and September) — 28 October
  • Quarter 2 (October, November and December) — 28 February
  • Quarter 3 (January, February and March) — 28 April
  • Quarter 4 (April, May and June) — 28 July

You can lodge your BAS online, by mail or over the phone (if you have a nil lodgement), and pay online, by mail or in person at an Australia Post outlet.   

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Can I change my GST reporting and payment cycle?

Depending on your circumstances and GST turnover, you may be able to change the cycle you use to report and pay GST. Contact the ATO on 13 72 26 for more information about changing your GST reporting and payment cycle.

What happens if I’m expecting a refund after completing my BAS?

If you’re due a refund, the ATO will pay this amount directly into the account you’ve nominated. This account must be at an Australian branch and held in your company, business or trading name, or by a registered tax agent.  

Can I lodge my BAS early?

Your business activity statement can be generated early if:

  • You’re going to be absent from your place of business before the end of the reporting period and the business will not be trading during that period.
  • You’re a short-term visitor who’ll leave the country before your BAS is generated.
  • Your entity is under some form of administration.
  • Your business has ceased.
  • You will be travelling and therefore will not be able to obtain your BAS.

BAS can be generated for up to six months in advance, covering six monthly activity statements or two quarterly activity statements. If you’re only required to report and pay GST quarterly but have elected to lodge monthly, you’re not eligible to receive your BAS statement early.  

What is luxury car tax (LCT)?

Luxury car tax is a 33% tax on cars with a value (including GST) above a set threshold. LCT only applies to the portion of the car’s value that’s above the threshold, not the total value of the car. It’s paid by businesses (car dealerships) and individuals that sell or import luxury cars. LCT must be declared on your BAS.   

What is wine equalisation tax (WET)?

Wine equalisation tax (WET) is a tax of 29% of the wholesale value of wine, paid by those who make wine, import wine into Australia or sell it via wholesale. WET is only payable if you’re registered for GST and must be declared on your BAS.  

What are fuel tax credits?

Fuel tax credits can be claimed by businesses which are registered for GST for the fuel tax included in the price of fuel used in most of their business activities. You can claim fuel tax credits for your machinery, plant, equipment and heavy vehicles as part of your BAS.

Fuel tax credits can be claimed for any taxable fuel that you purchase, manufacture or import, so long as you use that fuel in your business. The fuel tax rate is adjusted each year in February and August in line with the consumer price index, which means it’s possible to have more than one fuel tax credit rate in a BAS period.

Nothing in this article constitutes tax or legal advice. If you have questions about the GST as is applies to your business, please consult an accountant.

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This article is only for educational purposes and does not constitute legal, financial or tax advice. Make sure you consult a professional regarding your unique business needs.