What is GST and Why/When Does It Need to Be Paid?
- Jess The Small Business Book
- Jan 8
- 4 min read
Hello, fellow business owners! Let’s talk about GST - the three little letters that might
send shivers down your spine if you’re not sure what they mean or how they work.
But don’t worry, we’ve got you covered! In this blog, we’ll break down what GST is,
how it works for your business, when it needs to be paid, and how to stay on top of it
without breaking a sweat. Let’s dive in!
What is GST?
First things first - what exactly is GST? GST stands for Goods and Services Tax,
which is a 10% tax on most goods and services sold in Australia. Think of it as a way
for the government to collect tax from the final consumer, with businesses acting as
the middleman.
Here’s the gist:
You collect GST from your customers on your sales.
You pay GST to your suppliers on purchases for your business.
At the end of your reporting period, you subtract the GST you’ve paid from the
GST you’ve collected and either pay the difference to the ATO or are entitled
to a refund!
Sounds simple, right? Let’s make it even clearer!
GST Explained: Do You Need to Register?
Not every business has to register for GST, so how do you know if you need to?
Here’s the lowdown:
Mandatory Registration
You must register for GST if:
Your business has or is likely to have an annual turnover of $75,000 or more.
You operate a taxi, Uber, or other ride-sharing service, no matter your
turnover.
Voluntary Registration
Not hitting the $75,000 turnover mark? No problem! You can still register for GST
voluntarily. This might actually work in your favour if most of your customers are
GST-registered businesses because they can claim back the GST you charge them.
What’s GST-Free or Input-Taxed?
Before we move on, let’s talk about exceptions. Not everything gets slapped with
GST.
For example:
GST-Free Items: Basic foods, healthcare, education, and exports are usually
GST-free.
Input-Taxed Items: Financial supplies (like interest on loans) and residential
rents don’t have GST applied either.
If your business deals with these, make sure you know the rules - it’ll save you from
headaches later!
When Does GST Need to Be Paid?
Now that we know what GST is, let’s talk about when you have to pay it. GST is
reported and paid to the ATO as part of your Business Activity Statement (BAS).
How Often Do You Report?
1. Quarterly (Most Common): You’ll report and pay GST every three months.
2. Monthly: If your turnover is $20 million or more, you must lodge monthly.
(Smaller businesses can opt for this too; tip: it can help with your cash flow.)
3. Annually: For small businesses under the $75,000 threshold, annual
reporting might be an option if you register voluntarily.
Key Dates to Remember
BAS lodgements are typically due on the 28th of the month following your reporting
period – when lodging quarterly. For example, your BAS for the quarter ending 31
March is due on 28 April.
For monthly lodgements, this is usually due on the 21st of the following month. For
example, the BAS for the month ending July is due 21 August. Don’t forget to mark your
calendar!
We have a super handy downloadable calendar that has all the important tax and super dates listed for the financial year – get yours here!
How to Stay GST-Organised (Without Stress!)
Now, let’s talk about keeping it all together. Staying compliant with GST doesn’t have
to be a hassle.
Here are our top tips:
Track Everything
Keep a close eye on your sales, purchases, and expenses. Good record-keeping
makes life so much easier when it’s time to lodge your BAS. Accounting software like
Xero can be a lifesaver here!
Reconcile Regularly
Reconciling your accounts ensures your GST numbers match up with your
transactions. Doing this weekly or monthly is way better than scrambling at the last
minute.
Claim Those Credits
If you’ve bought something for your business and paid GST, don’t forget to claim it
back. Just make sure you’ve got valid tax invoices to back up your claims.
Set Aside GST Collected
This is a biggie! Open a separate bank account for the GST you collect. That way,
you won’t accidentally dip into those funds when it’s time to pay the ATO.
Ask for Help
If GST still feels like a puzzle, don’t stress. At The Small Business Book, we
specialise in helping small businesses like yours make sense of GST (and so much
more!).
Why Knowing GST Matters
Understanding and staying on top of GST is super important. Missing payments or
making mistakes can lead to penalties from the ATO, and no one wants that! By
keeping your records up to date and lodging your BAS on time, you’ll avoid
unnecessary stress and can focus on running and growing your business.
If you’re feeling overwhelmed or just want to make GST simpler, we are here to help.
Whether it’s setting up systems, managing your BAS, or answering your questions,
we’ve got your back!
So, there you have it - GST explained in simple terms. It’s not as scary as it seems
when you break it down! Remember, GST is just another part of running a successful
business, and with the right tools and support, you can handle it like a pro.
If you have questions or want some extra help with your GST, bookkeeping, or
payroll, get in touch with us.
We’d love to help your business thrive!