Not sure where to start with the Goods and Services Tax? Deciphering tax obligations can be a strenuous exercise for any small business.
To help you get to grips with the topic, we pulled together all of the resources, tips and tools you need to understand GST and how it affects your business. Here’s a review of everything:
- What is GST?
- Do I need to register for GST?
- Should I charge GST on all of my products/services?
- How do I register for GST and pay?
- What are GST tax credits?
- How do I claim GST tax credits?
- What if I’m having problems with suppliers’ tax invoices?
- Should I charge GST if I’m not legally obligated?
- Is there a bulk GST calculator?
- How can I avoid cash flow problems?
GST is a 10% tax consumers pay for goods and services sold in Australia. Businesses collect the tax by adding 10% to their prices, and then pay it to the ATO via their business activity statement (BAS).
Not every business has to collect GST. The ATO states that you can opt out as long as:
- Your business generates less than $75,000 in annual turnover;
- You run a non-profit that has less than $150,000 annual turnover;
- You don’t provide taxi travel services;
Tip: Keep an eye on your turnover even if you haven’t passed the threshold yet. If at any point it exceeds the non-taxable limit, you have 21 days to register and update your prices. If you don’t adjust, you’ll have to pay the outstanding GST even if you haven’t charged customers for it, which could considerably impact your financial health.
Not all items are taxed. The ATO lists these products and services as GST-free:
- Basic foods;
- Some medical, health and care services, products, aids and appliances
- Some child care, home care and residential care services
- Some religious and charitable services
- Exports* and sales through duty-free shops
*Exports are GST-free if they’re exported within 60 days of the supplier receiving payment, or the supplier issuing an invoice, whichever happens first.
For the full list, check this ATO webpage.
The only condition your business needs to meet is having an Australian business number (ABN). You can pay the tax via your business activity statement (BAS).
GST tax credits are the value of GST you’ve paid for through your business purchases. Because the tax is for consumers, rather than enterprises, you can claim this money back.
Tip: To claim credits on a purchase that’s more than $82.50 (including GST) you must have a tax invoice, so make sure you keep your documents organised. Invoices also need to feature specific types of information, which according to the ATO include:
- the supplier’s business or trading name
- the supplier’s Australian business number (ABN)
- the date of the tax invoice
- a brief description of the items sold including the quantity and the price it was sold at
- the GST amount (or a statement which says ‘The total price includes GST’)
- your business name or ABN (if the taxable sale is $1,000 or more)
Have a look here for templates, which you can also refer to when preparing your own invoices.
Firstly, you need to confirm whether you can make a claim — remember that not every purchase is eligible. For example, if your supplier isn’t charging GST because they’re not registered, you won’t receive any credits for the transaction. You can check their status via the ABN Lookup website.
Other circumstances when you wouldn’t be able to make a claim include:
- You don’t have the tax invoice
- You’ve purchased a motor vehicle priced above a certain limit
- You’ve purchased GST-free items/services
- You’ve purchased items/services you plan to use for personal or domestic purposes
- Your purchases fall under the category of “entertainment expenses”
- It’s been more than 4 years since you’ve made the purchase
You can file a claim through your business activity statement, or via your annual tax return.
If some of the necessary information is missing, or is incorrect, you can request a new tax invoice which covers the ATO’s criteria. In case the supplier doesn’t respond within 28 days, you can email the ATO at GSTmail@ato.gov.au or write to them at:
Australian Taxation Office
PO Box 3524
ALBURY NSW 2640
If you want to claim GST, you have to register and add the tax to your prices.
You should also consider the preferences of your customers. Take yourself as an example — if you claim GST credits, you consider this part of the price as a temporary expense. But if one of your suppliers isn’t adding the tax, your expense management becomes that extra bit more complicated.
If used strategically, receiving GST credits can also ease cash flow burdens. Making a claim on a quarterly basis can ease working capital fluctuations and keep your finances in better shape.
Adding GST to each of your products or services one by one can take a lot of time, so we’ve built this tool that does it for you. All you need to do is copy-paste. You can also use it to calculate GST credits from multiple invoices.
Here’s how it works:
Add GST to your prices
List your products and services under “Item Description”, with their pre-GST prices under “Base Price”.
The sheet calculates the GST Price by adding 10% of the value of the Base Price on top. While there are only 10 example rows, you can add more and drag the formula down, like this:
Subtract GST credits from your invoices
Normally the GST value should be listed clearly outlined in your suppliers’ tax invoices. If you’ve not received an invoice yet, or it’s not complete, you can calculate the GST credit with the Excel sheet.
Keep in mind that subtracting GST credits isn’t just taking 10% off the value of the invoice. Here’s an example to show you why: to charge GST for an item that costs $150, you need to add $15 on top, making it $165. But 10% from $165 isn’t $15 — it’s $16.5.
To calculate how many credits you’re owed, the sheet uses this formula instead:
Invoice Value / 11 = GST credit
$165 / 11 = $15
Like in the first example, you can add more items to the list and drag the formula under “GST credits” down. The sum on the right will update with any changes that you make.
Remember that GST collections belong to the ATO, not to your business. If you use them as working capital, you’ll end up with a nasty surprise once it’s time to pay taxes. The ATO recommends keeping the collected GST in a different account — that way you can keep the money separate from your own finances, minimising the chances of using it on accident.
If you’d like to review any of the questions again, click here to get back to the index.
This information has been collected by multiple resources published by the ATO.
Originally published July 25 2018 , updated May 17 2019