GST Basics

GST (Goods and Services Tax) can be one of those things that many small business owners would prefer they didn’t have to deal with. But even without a financial background GST need not be a headache. Today, I want to share some GST basics that I hope will help simplify the process for you.

Let’s talk about registration first:

You must register for GST if:

  • you run a business which has a turnover of $75,000 or more
  • you run a not for profit which has a turnover of $150,000 or more
  • you provide taxi travel

If you are under those amounts you can still register for GST which can be beneficial if you have large expenditure and are not yet making a profit. You can only know this if you have good bookkeeping systems in place. For more information on registering for GST visit the ATO here {https://www.ato.gov.au/Business/GST/Registering-for-GST/}

So, you have decided you do need to register for GST? What next?

When you decide to register, it is important to contact a bookkeeper or an accountant to set up the systems for you. There are some transactions such water, bank fees etc which do not have GST so they will be able to set up your systems correctly to make it much smoother for you in your day to day accounts.

Your obligations once you are registered:

GST registration comes with the obligation to lodge BAS statements, yes that big, scary word (or 3 words technically) BAS.

BAS stands for Business Activity Statement, put simply it records the GST you have paid (on expenses) and GST you have received (on sales). This is the equivalent to a GST tax return which needs to be lodged on a quarterly basis.

You are also obligated to ensure you include the following on any invoice you issue: the words ‘TAX INVOICE’

  • the sellers identity
  • the sellers ABN
  • the issue date
  • description of items sold or service provided
  • GST amount (if applicable)
  • The buyers identify or ABN if the invoice is for more than $1,000

Once you have created and sent out your invoices you need to keep copies for at least 5 years.

It is also important to include your payment terms when you set up your invoices. This isn’t a requirement, well unless you want your customers to know how to pay you! Things to consider in this section include:

  • what payments methods you accept
  • whether you provide credit and the terms of credit
  • debt collection policies

Payment terms are important because they affect achieving your goals by influencing your business’ income, costs and risk of insolvency.

Setting payment terms is also important because it affects your cash flow. Offering credit makes your cash flow less predictable. To stay solvent, you need enough cash flow to pay your bills as they become due so consider this when you decide on your payment terms.

It is important that you receive money from your clients before you make payments related to those jobs. You don’t want to spend your money before you receive it.

It’s time to lodge my BAS, what do I do now?

If you feel confident with your accounting program and accounts you may choose to fill out your BAS yourself. Alternatively you can choose to have a tax or BAS agent lodge on your behalf through their preferred electronic channel.

You can view all BAS lodgement dates here on the ATO website {https://www.ato.gov.au/tax-professionals/prepare-and-lodge/bas-agent-lodgment-program/#BASLodgeProg_DueDates}

BAS lodgement doesn’t need to be headache, sure it is one more piece of paperwork but it is only 4 times a year. If you start off with a good system in place and a basic understanding of the process and your obligations you can’t go wrong.

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