Natasha at ND Accounting offers accounting and taxation services for individuals and businesses in Warrawong, Shellharbour and Wollongong, with clients also as far as Central Queensland and out to Western Australia.   Since 2009 ND Accounting have been offering accounting and taxation services from the ground up working alongside sole traders and small businesses managing tax, developing business plans, managing the bookkeeping, identifying risks, putting the correct structures in place for taxation and implementing financial management systems.

With all this experience Natasha from ND Accounting has identified common questions and answers for businesses as to when to register for GST and how does GST work and affect operations.

What is GST?

GST stands for Goods and services tax.  It is a 10% tax added to the cost of most goods, services and other items sold or consumed in Australia.

GST is generally excluded from the sale of basic food (unprocessed food such as fresh meat, fruit & vegetables), some education courses and some medical, health & care products.

Who must register for GST?

If you are in business, the threshold for registration for GST is $75,000 or more. ($150,000 or more for non-profit organisations)

Once your turnover reaches this threshold you must register.

Turnover is your business’s gross income/sales, not your business’s profit.

If you haven’t registered for GST and become aware that your GST turnover will exceed the $75,000 per year threshold, you will have to register for GST within 21 days.

How do I register for GST?

You must complete an application to register for GST.

You need an ABN to be part of the GST system. Your ABN will also be your GST registration number.

You can register:

How do I calculate GST on a good or service?

To calculate the GST, you simply add an additional 10% on top of your service/sale price.

E.g. You operate an electrical business, your hourly rate is $60/hour. You would charge an additional 10% on top of the $60/hr, therefore making the grossed up sale value to be $66/hr.

Or, you can simply just multiply your costs before GST, by 1.1, to give you the total amount to invoice inclusive of GST.

However reverse GST calculations are quite tricky.

To figure out how much GST was included in the price you have to divide the price by 11.  ($110/11=$10)

To work out the price without GST by dividing the amount by 1.1 ($110/1.1=$100)

How does the GST system work?

Once you have registered for the GST system, you will need to determine:

  • If your sales include GST or are GST Free
  • Issue tax invoices for your taxable sales
  • Claim GST credits for any business purchases that include GST
  • Report GST on either a Cash (as you pay) or accrual basis (invoiced but not yet received or paid)
  • Prepare and lodge your Business Activity Statements each quarter, by the due dates to avoid penalties

Here is an illustration of how GST works

You can find out when to charge GST (and when not to) here

Once registered for GST and in possession of an ABN, it is necessary to complete GST returns, which are included in the Business Activity Statement (BAS).

Business activity statements, are automatically sent to businesses or their tax agents 2 weeks prior to the month or quarter ending.  The BAS’s are usually due by the 28th of the following month after end of the quarter, with the exception of the December BAS which is due the 28th of February.

Here is a sample of what a BAS looks like here.

This is used for reporting and paying goods and services tax (GST).

Options for Reporting & Paying GST?

Returns are completed quarterly or monthly. Most businesses report and pay their GST quarterly, however monthly returns are compulsory for bodies with a turnover in excess of $20 million.

Your first quarterly business activity statement (BAS) of each financial year allows you to choose the way you will calculate, report and pay for the year.

The 3 methods available for reporting GST are:

  1. Calculate and report GST quarterly
    • You must report amounts that you have collected & paid in the following labels of the BAS
      1. G1 – Total Sales
      2. G2 – Export Sales (if applicable)
  • G3 – Other GST-Free Sales (if applicable)
  1. G10 – Capital Purchases
  2. G11 – Non-Capital Purchases
  3. 1A – GST collected on Sales
  • 1B – GST Paid on Purchases
  1. Calculate GST quarterly and report annually
    • This option allows you to report less information on a quarterly BAS, but still calculate and pay your actual GST amounts quarterly. Labels to complete are:
      1. G1 – Total Sales
      2. 1A – GST collected on Sales
  • 1B – GST paid on purchases
  • You must then complete an Annual GST Information report, which has the same lodgement due date of your tax return.
  1. Pay GST instalments quarterly and report annually.
    • This option is only available to business with a turnover of $2 million or less. The ATO will calculate the GST instalments amount that you need to pay each quarter.
    • You will account for any difference between your actual GST liability and the total of your GST instalments for the year, to determine if you have a liability or refund.
    • You must then complete an Annual GST Information report, which has the same lodgement due date of your tax return.

 

Regardless of which option you choose, If you have employees, you will also need to complete the following labels on your BAS each quarter:

  1. W1 – Gross wages paid
  2. W2 – PAYG Tax Withheld
  • W4 – Amount withheld where no ABN is quoted (if applicable)
  1. W3 – Other amounts withheld (excluding any amounts shown in W2 & W4)
  2. 4 – Total PAYG Withheld

Bookkeeping Warrawong

If you need personalised advice you can contact ND Accounting and taxation services on 4272 3048.

Based in Wollongong, Natasha prides herself in providing professional and quality accounting, bookkeeping & taxation services to all clients, whether they are businesses or individuals.