How Does the Goods and Services Tax (GST) Work?

By Dino Di Giulio, Principal of Nationwide Financial

Introduction

At Nationwide Financial, we understand that navigating Australia’s tax system can be challenging for both new and established businesses. One of the most common areas of confusion is the Goods and Services Tax (GST). I’m Dino Di Giulio, and in this blog post, we’ll break down how GST works, who needs to register, and how it affects your business operations.

Table of Contents

1. What is the Goods and Services Tax (GST)?
2. Who Needs to Register for GST?
3. How to Register for GST
4. How GST Works in Practice
   • Collecting GST on Sales
   • Claiming GST Credits on Purchases
5. Reporting and Paying GST
6. GST Compliance Obligations
7. Common GST Mistakes to Avoid
8. How Nationwide Financial Can Help
9. Conclusion

What is the Goods and Services Tax (GST)?

The Goods and Services Tax (GST) is a 10% value-added tax applied to most goods, services, and other items sold or consumed in Australia. Introduced on 1 July 2000, GST is a federal tax managed by the Australian Taxation Office (ATO). It’s designed to be ultimately paid by the end consumer, but businesses are responsible for collecting and remitting it.

Who Needs to Register for GST?

You must register for GST if:

• Your business has a GST turnover of $75,000 or more ($150,000 for non-profit organizations).
• You’re a taxi or ride-sourcing driver, regardless of turnover.
• You want to claim fuel tax credits.

Even if your turnover is below the threshold, you may choose to register voluntarily. This can be beneficial if you want to claim GST credits on business purchases.

How to Register for GST

Registering for GST requires an Australian Business Number (ABN). You can register:

• Online via the ATO Business Portal.
• Through a registered tax agent or BAS agent.
• By calling the ATO directly at 13 28 66.

Ensure you understand your obligations once registered, including charging GST on sales and lodging Business Activity Statements (BAS).

How GST Works in Practice

Collecting GST on Sales

When selling goods or services, you generally need to:

• Add 10% GST to your sale price.
• Issue a tax invoice if the sale is over $82.50 (including GST).
• Keep records of all transactions.

For example, if you’re selling a product for $100, the price including GST becomes $110.

Claiming GST Credits on Purchases

Businesses can claim credits for the GST included in the price of purchases made for business use:

• Ensure the purchase is for a taxable business expense.
• Obtain a valid tax invoice from the supplier.
• Keep detailed records for at least five years.

Reporting and Paying GST

• Business Activity Statements (BAS): GST-registered businesses must lodge BAS monthly, quarterly, or annually, depending on turnover.
• Calculating GST Payable:
  • GST Collected (on sales) minus GST Credits (on purchases) equals Net GST Payable.
• Payment Deadlines:
  • Quarterly BAS is usually due on the 28th day of the month following the end of the quarter.
  • Monthly BAS is due on the 21st of the following month.

GST Compliance Obligations

• Maintain Accurate Records: Keep all sales and purchase invoices.
• Issue Tax Invoices: Must include specific details such as ABN, date, and GST amount.
• Lodge BAS on Time: Avoid penalties by meeting all ATO deadlines.
• Adjustments and Corrections: Make necessary adjustments in your BAS if errors are found.

Common GST Mistakes to Avoid

• Failing to Register on Time: Register as soon as you meet the turnover threshold.
• Incorrectly Claiming GST Credits: Only claim credits for purchases that include GST and are for business use.
• Late BAS Lodgments: Consistent delays can lead to audits and penalties.
• Not Keeping Proper Records: Inadequate documentation can result in disallowed credits.

How Nationwide Financial Can Help

Understanding GST can be complex, but you don’t have to navigate it alone. At Nationwide Financial, we offer:

• GST Registration Assistance: We’ll help you determine if you need to register and guide you through the process.
• BAS Preparation and Lodgment: Ensure your statements are accurate and submitted on time.
• GST Compliance Advice: Keep your business compliant with the latest regulations.
• Audit Support: We’ll assist you if the ATO reviews your GST affairs.

Conclusion

Properly managing GST is essential for the financial health and compliance of your business. By understanding how GST works and meeting your obligations, you can avoid costly mistakes and focus on growing your business.

Need help with GST or other accounting services?

Contact Nationwide Financial today for expert advice tailored to your business needs.

Contact Us

• Website: www.nationwidefinancial.com.au
• Phone: 02 9898 6777
• Email: [email protected]
• Address: Suite 101. 29-31 Solent Circuit, Norwest, NSW 2153

At Nationwide Financial, we’re committed to your success.