Tax Return:: The Basics of GST

Hello, this is your tax and super specialist, P&C Tax Professionals.

In today’s blog post we will explore the concept of goods and services tax (GST) which is basically a 10% tax that is levied on most of the goods and services and other items that are sold or consumed in Australia. So, the simple question is “how does GST work?”.

<How does GST work?>

As many of you know, the rate of GST is currently set at 10%. What this means is that if you were a business and you charged $100 for the sale of your goods and services, your customer/client will be charged a total of $100 * (1 + 10%) = $110. From here, the additional $10 is the amount of GST you have to pay to the ATO.

On the other hand, if you purchase supplies for your business, as the buyer you will be charged 10% in GST. This GST can then be claimed back as a credit from the ATO. As each of the quarterly GST period comes to an end, you are required to lodge your Business Activity Statement (BAS). Your quarterly BAS will include the GST you have collected on your sales minus any GST you have paid on your purchases for the business. If the GST collected from sales is greater than the GST paid for your expenses, you will have to pay the net GST to the ATO upon the submission of your BAS. The same goes for the opposite scenario, if the GST collected from sales is less than the GST paid for your expenses, you will be able to claim back the net GST from the ATO in the form of a GST credit.

<Registering for GST>

Generally, it is compulsory for you to register for GST if:

> your business has a GST turnover (gross income from all businesses minus GST) of $75,000 or greater.

> you start a new business and it is anticipated that your GST turnover will reach the GST threshold during the first year of operation

> if you are already in business and have reached the GST threshold of $75,000

> if your non-profit organisation has a GST turnover of $150,000 per year or more

> if you provide taxi, limousine or ride-sourcing travel for passengers (this is irrespective of your GST turnover) – applies to both owner drivers as well as those of you who have leased or rented a taxi/car.

> if you want to claim fuel tax credits for your business.

If your business doesn’t fit with any of the categories listed above, registering for GST is voluntary. However, if you decide to register for GST, you would have to remain registered for at least 12 months.

Prior to registering for your GST, you must first apply for an Australian Business Number (ABN) for your business if you don’t already have one.

Once you obtained your ABN, you can now register for GST through any of the following options:

> through Online services for business

> via phone on 13 28 66

> through your registered tax agent or BAS agent

> by completing the Add a new business account (NAT 2954) form.

If are required to register for GST but you haven’t, there is a high possibility you would have to pay GST on sales that were made since the date you were required to register. This may apply even if you didn’t include GST in your sale price. On top of that, you may also be liable to pay penalty fees and interest.

<List of main GST-free goods and services>

You do not need to include GST in the price of your product or service if it is classified as a GST-free item. The good news is that you are still able to claim credits for any GST-inclusive goods or services you purchased that is used to make GST-free sales for your business.

Some of the common GST-free items consists of:

> most basic/unprocessed food

> some education courses, course materials and any related excursions or field trips that are part of the course

> some medical, health and care services

> some menstrual products

> some medical aids and appliances

> some medicines

> some childcare services

> some religious services or charitable activities

> supplies of accommodation and meals to residents of retirement villages by certain operators

> cars for disabled people to use (only when certain requirements are satisfied)

> water, sewerage and drainage

> international transport and related matters

> precious metals

> sales through duty-free shops

> grants of land by government

> farmland

> international mail

> exports

> some telecommunications supplies

Let’s leave it off here, but if you come across any questions or would like to make an enquiry in relation to your tax or super, please contact us through our official Facebook Page (P&C Tax Professionals – Australia) or send them to our email at pnctax@naver.com.

Thank you and bye for now!