What Happens When My Business Crosses The $75,000 GST Threshold?

Last Updated on Feb 6, 2024 by James Webb

GST is a major tax in Australia that most businesses will need to deal with. As a new business owner, it can be difficult to understand all the different tax obligations you have. However, to help small business owners understand GST, we have created this guide to help you get through the first stages of your GST obligations when you reach the $75K threshold.

How does GST work?

GST is a 10% tax added on to most goods and services sold within Australia. A business is only required to add GST onto the goods or services they sell when they hit a $75,000 annual turnover threshold. This is the threshold for registering for GST. For charities, this threshold is $150,000 per year (GST must be charged from the get-go for Uber or taxi drivers). When you register you will need to add 10% onto the price of most items you sell.

When you register for GST you can also receive GST your business spent on goods and services back. This is known as GST credits. Calculating GST, whether on the amount you paid for an item or the amount you need to add is simple.

To calculate the amount of GST you paid on an item simply divide the price by 11 and you will get the amount of GST you paid. Adding GST requires you to simply add 10% of the price you want to sell a good or service for on top of that price.

How do I calculate the $75k threshold?

Your GST turnover is your gross business income excluding GST included in sales, excluding sales that are not for payment, input-taxed sales, and any sales not connected with Australia. This makes calculating your GST turnover simple. All you need to do is take any of the above exclusions away from your gross business income.

If your future projections for the next 11 months look to push you over the $75k threshold, or the previous 11 months plus the current month push you over the threshold, then you will need to register for GST.

What are my obligations after registering for GST?

After you have registered for GST you will have a series of obligations you must fulfil. Firstly, you will be required to charge the extra 10% GST on most goods and services you sell. There are certain items that are GST free, if you are unsure which items are GST free talk to your local bookkeeper or accountant.

You will also be required to submit a quarterly or monthly Business Activity Statement (BAS). A BAS is where you report the amount of GST you collected from the sales of your goods and services. This is also when you will send the money you collected from GST to the ATO. This is also the reason why some business owners put registering for GST off. However, engaging with a local bookkeeper for help with this can really make things straightforward.

What happens if I don’t register for GST?

Not being registered for GST could impact your customer relationships and cashflow. Your clients will be encouraged by the ATO to find out whether you are registered for GST or not by searching for your business on the ABN Lookup website.

If you are not registered for GST, your clients will be unable to claim GST credits after they have purchased your products or services. This could result in them choosing another business over your own. You will also be unable to claim GST tax credits yourself, potentially negatively affecting your cashflow.

Businesses who also do not register for GST when they are obligated to may find the ATO chasing them. If caught, you could be penalised heavily. Penalties may include being required to pay all GST owed, potential interest on repayments, and potential fines.

Should I register for GST?

When establishing or expanding your business, it’s crucial to maintain flexibility and implement systems that accommodate a diverse client base. Registering for GST is often a prerequisite in standard supply agreements with specific clients, particularly when dealing with government or large businesses. GST registration becomes advantageous when quoting or tendering to such entities, as some accounting systems assume all suppliers are GST registered, and non-registration may render your business ineligible to work with organisations relying on GST-compliant processes.

GST registration goes beyond just compliance; it can positively influence your business image. Your brand, encompassing products, services, and client interactions, extends to seemingly minor details like GST registration, projecting an image of a stable and dependable business. Being registered for GST can convey an impression of establishment and financial stability, enhancing your credibility compared to non-registered businesses that may be perceived as new or financially fragile.

How do I register for GST?

In order to register for GST, you will need an Australian Business Number, as the your ABN is the one registered for GST. The good news is, if you don’t have an ABN already, you can apply for your ABN and register for GST at the same time.

If you already have an ABN, but haven’t registered for GST, you can register for GST here.

Conclusion

To ensure that you stay on top of your tax obligations you should talk to your bookkeeper and accountants about which tax obligations you must fulfil. They will be able to help you register for GST and fulfil your BAS obligations. Talk to LINK Books today about fulfilling your obligations.