GST Simplified

Everyone pays GST

It does not matter whether you are an individual, a business, a church or a charity, everyone pays GST. The only way to avoid GST is to not spend money. This is because most every time a service is provided or goods are sold GST is included in the price.

Answers you need to think about

One of the few exceptions to when GST is not included in the selling price is when a business is not registered for GST. Businesses that have an income turnover of less than $75,000 do not need to register for GST. The only transaction that escapes GST is when a good or service is provided by an unregistered business or individual.

Prior to July 1, 2015 there were four methods of calculating and claiming motor vehicle expenses for both individuals and businesses. From July 1, 2016 the 12% of original value method and the one third of actual cost method can no longer be used.

GST is an exclusive system

Unless a good or service is specifically excluded under the GST legislation a GST registered business must include it in the price charged. The two categories of goods and services that don’t have GST included are GST Free, and Input Taxed goods and services.

When must you register for GST

All businesses that earn more than $75,000 a year in income, and charities that earn more than $150,000 in income a year, must register for GST. The only time you can choose to register for GST is when your businesses earns income of less than$75,000. When a business becomes aware that its turnover is more than $75,000 a year it must register for GST within 21 days.

If you want to learn when a business should register for GST if they have income of less than $75,000, contact us.

Most businesses do not effectively pay GST

GST is paid by all businesses on nearly everything they buy, and can be claimed as a credit by GST registered business. This credit will either reduce the amount of GST collected that must be paid to the tax office, or it can be claimed as a refund where the GST paid is greater than GST collected. This ability to claim a credit for GST paid means businesses do not effectively pay GST.

There are only three types of GST goods and services

The three types of GST goods and services are GST taxed, GST Free and Input taxed. If something is not classed as GST Free or Input Taxed it should include GST. GST Free goods and services tend to be the necessities of life such as unprocessed food, essential medical and health services and education. They also include goods and services that are exported. Input Taxed goods and services include financial services, such as bank interest and charges, and residential rent.

It does not matter how you operate your business

Where you fit into the GST system does not depend on how you operate your business. Sole traders, partnerships, companies, co-operatives and trusts are all treated the same. It is the goods that you sell, or the services you provide, that dictates how you are treated under the GST system.

Who can claim GST as a refund is the main difference

The only factor that distinguishes businesses from unregistered consumers, and one business from another, is the ability to claim a GST refund. Registered businesses that sell or provide GST Taxed and GST Free goods and services can claim a credit for the GST they pay. Registered businesses that sell or provide Input Taxed goods or services do not charge GST but they cannot claim a refund of the GST they pay. Any person or entity not registered pays GST cannot claim a refund of any GST paid.

Do not worry if you make a mistake

If you have completed and lodged your ABN application, and made a wrong choice on the form, you do not have to worry. This might be having chosen the monthly option instead of the quarterly, listed your address instead of your accountant or incorrectly applied to be registered for GST and you did not need to. If you make a mistake you can ask the tax office to amend your application to show the correct information.

How to register for GST

There are three ways in which registration can be made. The first is to complete an application form and mail it to the address shown in the instruction booklet that accompanies the registration application. The second is to have TaxBiz Australia complete and lodge the application for you. The last option is to register via the Internet at www.business.gov.au and complete the registration on line.

If you run a business and are worried at all about what you need to be doing with regard to GST, or you are not getting proactive advice from your current accountant, contact us