What is GST?
Goods and services tax (GST) is a broad-based consumption tax charged at the rate of 10% on the sale of most goods and services in Australia. GST is charged at each step in the supply chain, with registered businesses including GST in the price of goods and services they sell. For GST, a sale or supply includes a sale of goods, lease of premises, hire of equipment, giving advice, export of goods, and supply of other things. A purchase includes an acquisition of goods or services such as trading stock, a lease, consumables and other things.
Does a business have to register for GST?
A business must register for GST if their annual turnover is $75,000 or above per year. A business may choose to register if the turnover of the business is below $75,000.
How GST works
If a business is registered for GST they must included GST in the price of most goods, services and other things they sell to others in the course of business. These are called ‘taxable sales’.There are other types of sales where GST is not included in the price. These are either ‘input taxed’ sales or ‘GST-free’ sales. GST may be included in the price of purchases (including importations) made by a business, and it’s a good idea to allow for it when setting prices. When a business is registered for GST, they can generally claim a credit for any GST included in the price they pay for things purchased by the business. This is called a GST credit.
Accounting for GST
The business is required to pay the GST it collects to the Australian Taxation Office on a regular basis. The total amount the business must pay the Tax Office is reduced by the amounts of GST credits things bought by the business. Reporting and paying tax is done through a Business Activity Statement (BAS). The business accounts for its GST obligations on the BAS at the end of each tax period. Most small busineses normally have quarterly tax periods (because their GST turnover is less than $20 million) but some choose to have monthly tax periods.
A tax invoice is a source document that records the sale of goods or services and complies with the GST law. The information that has to be included in a tax invoice is explained in the GST for small business publication on the ATO website. If a business make taxable sales with a GST-inclusive value of more than $82.50 and the customer asks for a tax invoice, the business must provide one within 28 days of the request. For this businesses usually issue all of their invoices in a form that satisfies the requirements for a GST tax invoice. A business must have a tax invoice for a purchase before they claim a GST credit in a Business Activity Statement. A tax invoice is not needed to claim a credit if the GST-inclusive value of the purchase is $82.50 or less. However, it is advisable to have some documentary evidence to support these GST credit claims, such as a cash register docket or other receipt.