One of the most common questions we get asked by small businesses is when to register for GST. The answer is quite simple. You need to register for GST when:
- When your business or enterprise has a GST turnover of $75,000 or more.
- When you start a new business and expect your turnover to reach the GST threshold (or more) in the first 12 months.
- If you’re already in business and have reached the GST threshold. Ideally, you should register for GST as soon as you anticipate that you will reach the $75K threshold.
Check each month to see if you’ve reached the threshold, or are likely to exceed it. You need to register within 21 days of your GST turnover exceeding the relevant threshold.
There are other reasons why you may choose to register for GST ahead of reaching the threshold. These include:
- All (or almost all) of your clients are registered for GST themselves and can therefore claim the GST credit on your invoice. For example, a recruitment consultant starting out in business.
- It is important to you that clients are not made aware that your turnover is not yet at the $75K mark. (You might not want your customers to know that you are a new business or have not reached this level of turnover yet).
- You envisage that your income is going to be lower than your expenses for a certain period, because you are in a start-up phase, for example. What this means is that you will end up with GST refunds each quarter that you otherwise would not receive if you were not registered for GST.
- If you are a medical professional and your turnover is less than $75K, you may still want to register for GST as you will be able to claim back the GST credits on business expense purchases.
Some reasons why you may choose not to register for GST ahead of the threshold include:
- You are a business that sells goods or services to consumers who themselves are not registered for GST and therefore cannot claim the GST credit on your invoice. An example would be an ‘at-home’ online business selling baby supplies. The second you raise your price to cover the GST you become less competitive compared to others in business doing a similar activity as you that are not yet registered.
- You are busy enough as it is, and it is not important to you that your customers know if you have, or have not, reached the $75K turnover threshold. Being registered for GST means that you need to set aside time each quarter to prepare or lodge a BAS and/or engage an accountant or BAS agent to assist you.
Want to learn more?
For more information, be sure to check out the ATO website, or get in touch with our team. We’d be more than happy to help!
