When should I register for GST?

Many sole traders find the concept of the Australian Goods and Services Tax (GST) confusing and are unsure as to whether they are required to register for GST.

What is GST?

GST, is a 10% charge added on to goods and services. If you're registered for GST you'll need to add the 10% on to all invoices you issue to your customers. You'll also need to take note of any GST you have paid out when making purchases for you business. These will be offset against incoming GST.

Once you're registered for GST throughout the year you'll be required to report your totals for each quarter to the ATO using a BAS (business activity statement).

Once your annual revenue exceeds $10 million you'll also be required to complete worksheets and provide more detailed supporting documentation.

When does a sole trader need to register for GST?

If you're a sole trader and one or more of the following apply to you, then you must register for GST:

- When your business or enterprise has a GST turnover (gross income from all businesses minus GST) of $75,000 or more (the GST threshold).
- When you start a new business and expect your turnover to reach the GST threshold (or more) in the first year of operation.
- If you're already in business and have reached the GST threshold.
- When you provide taxi or limousine travel for passengers (including ride-sourcing) regardless of your GST turnover - this applies to both owner-drivers and if you lease or rent a taxi.
- If you want to claim fuel tax credits for your business.

How do I register?

Once you've decided to register you'll need to do the following:

- Register within 21 days of becoming required to do so.
- Ensure you already have an ABN.
- Go to https://www.ato.gov.au/general/online-services/businesses.
- Or speak with your accountant.

What happens if I don't register?

If you don't register for GST and are required to, you may have to pay GST on sales made since the date you were required to register. This could happen even if you didn't include GST in the price of those sales. This could happen even if you didn't include GST in the sales price. You may also be subject to penalties and interest.

How often does a sole trader need to report and pay GST?

You must submit Business Activity Statements (BAS) to the ATO every three months if you are a sole trader and registered for GST. Your annual tax return is then amended to include the GST component of your income and expenses. Payment or refund for GST is calculated and paid when you submit the BAS.

It's important to keep track of and report your GST as required, otherwise you'll end up with a lot of extra work come tax time.

When you report your taxable income for your tax return you leave out GST from the calculation.

Conclusion

Registering for GST at the right time if important so that you don't end up owing back payments and potentially fines to the ATO.

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