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Ross, Cowley & Co. Certified Practicing Accountants

GST Registration


An entity or enterprise must register for GST if your GST turnover is $75,000 or more. If your GST Turnover is less than $75,000 you may still register for GST if you choose. “Your GST turnover is your gross business income (not your profit), excluding any: GST included in sales to your customers, sales not connected with an enterprise that you carry on, input taxed sales you make and sales not connected with Australia.” (GST For Small Business, ATO, 2008)

GST Registered Entities:

If you are registered for GST then you can include GST in the price of most goods and services sold.

GST Registration also requires you to complete an Activity Statement every month or quarter or an annual GST return. This allows you to: report and pay the GST on your sales and claim credits for the GST included in the price of purchases.

A GST registered business must also issue Tax Invoices. This is so that any customers or clients that you have, that are also registered, may claim their GST credits from their purchases.

You are also required to obtain Tax Invoices for your purchases. If a supplier/contractor  is not registered for GST, and therefore does not provide a Tax Invoice, you cannot claim back any GST Credits for that purchase.

When completing an income tax return, a GST Registered Entity must exclude the GST on sales and purchases.

Examples:

Including GST in the price of a good: If I want to sell an item for $100, and am registered for GST, then I should now charge $110 to include the $10 (being 10%) of GST that I must pay.

Claiming GST Credits: I purchase an item for $110. Included in this item is $10 of GST. I can therefore claim the $10 (being 10%) back on my activity statement. (Note: The period of when to claim varies between accounting on a Cash Basis and accounting on an Accrual Basis. For further details refer to www.ato.gov.au)

Calculating GST on Purchases: I buy an item for $110. Included in this price is GST. To calculate the GST included in this price I divide $110 by 11. 110/11=10. Therefore this item includes $10 of GST.

A Non-GST Registered purchase: I buy an item for $40.10. I am registered for GST, however the person I am buying the item off is not. Therefore there is no GST component I can claim. In my income tax return I will claim the expense as $40.10.

Income Tax Return: I buy an item worth $88. GST is included. Therefore in completing my deductions I must exclude the $8 of GST. Similarly, if I have an income of $22,000 then the $2000 of GST must be excluded. So I will report an $80 expense and income of $20,000

 

Tax invoices for sales of less than $1,000

Tax invoices for taxable sales that total less than $1,000 must include:

  1. The words ‘tax invoice’ stated prominently
  2. The name of the seller
  3. The Australian Business Number (ABN) of the seller
  4. The date of issue of the tax invoice
  5. A brief description of the things sold
  6. The GSTinclusive price of the taxable sale, and
  7. The GST amount. This can be shown separately or, where the GST to be paid is exactly oneeleventh of the total price, as a statement such as ‘Total price includes GST’.

Tax invoices for sales of $1,000 or more

Tax invoices for taxable sales that total $1,000 or more must include:

  1. The words ‘tax invoice’ stated prominently
  2. The name of the seller
  3. The ABN of the seller
  4. The date of issue of the tax invoice
  5. The name of the buyer
  6. The address or ABN of the buyer
  7. A brief description of the things sold
  8. For each description, the quantity of the goods or the extent of services sold
  9. The GST inclusive price of the taxable sale, and
  10. a) when GST to be paid is exactly one‑eleventh of the total price, a statement such as ‘The total price includes GST’, or b) the GST amount

 

Non-GST Registered Entities

If you are not registered for GST you CANNOT include GST in your sales. You also CANNOT claim the GST component of your purchases. However, if the purchase is directly business related, then you may claim the total figure, including the GST component, in your income tax return.

Non-GST registered entities issue Invoices. This allows a customer/client to know that you are not registered for GST.
For example: I have an item worth $100 that I am selling. I am not currently registered for GST. I therefore must sell this item for $100. I cannot add GST to the figure. However, if I buy an item for $110 which includes GST. I can claim $110 on my income tax return.