GST and BAS in Australia
You’ve probably heard of GST before – it stands for goods and services tax and is added to nearly everything you buy in Australia. As it’s almost always included in the price on the shelf, you probably don’t give it a second thought.
Chapter 1: How can GST affect my business?
If you’re a business, you may be required to register for and collect GST. This means:
- you may need to add GST to your prices
- you will need to send that extra money to the ATO
- you can claim back any GST that you’re charged on business supplies and expenses
How much is GST?
10% is the GST rate. It’s charged on most sales in Australia, but not all of them.
Some types of products and services can be sold without adding GST, including:
- staple foods such as fruit and vegetables, meat, most dairy, spices, and sauces
- some education courses and resources
- some medical and healthcare products
- financial products and services
GST on imports
You will have to pay GST on most imported goods. It’s added to the price you paid for the goods plus shipping costs, and you may have to pay it before customs will release the shipment. You can generally claim the cost back when submitting a GST return.
GST-registered businesses don’t have to pay GST on services or subscriptions from overseas suppliers.
GST on exports
You don’t have to charge GST on exports so long as the goods leave Australia within 60 days of you receiving payment or issuing an invoice, whichever comes first.
Chapter 2: Registering for GST
Ready to register for GST? We’ll take you through the methods and each step of the registration process.
Now that you’ve got a handle on the basics find out if your business needs to register for GST and, if so, how to do it and what happens next.
Who needs to register for GST?
- Australian based businesses with an annual turnover of $75,000 or more
- Taxi drivers and ride-sharing drivers, no matter what their turnover is
- Not-for-profit organisations with an annual turnover of $150,000 or more
- Businesses that want to claim fuel tax credits
- International retailers with total Australian sales of $75,000 or more a year
You can get into legal difficulty if you don’t register for (and collect) GST when you should.
If your annual turnover is under the threshold, you can voluntarily register for GST. There are benefits of registering your business for GST, but there will also be extra things for you to think about, so it’s good to weigh up your options first.
Benefits of registering
Once you’re GST registered, you don’t end up paying GST on business expenses. You’ll still get charged the GST-inclusive price when you make the purchase, but you can claim that money back when you file your return with the ATO.
What do I need to register?
You’ll need an Australian Business Number (ABN). However, if you’re registering as a company, then you’ll need an Australian Company Number (ACN) before applying for your ABN.
- Cash accounting
Some small businesses are able to use cash accounting. Those businesses only owe GST on a sale once the customer has paid them.
- Accrual basis accounting
Some businesses must use accrual-basis accounting. That means they owe GST on a sale as soon as they raise the invoice or when they get paid, whichever comes first.
- Simpler accounting method
Food retailers can use the simplified accounting method (SAM). Check out this ATO page to see if it’s for you.
Many businesses use cash accounting for GST but accrual accounting for income tax. That may sound complex, but good accounting software makes it easy to move between the two.
How to register for GST
It’s simple to register for GST yourself, and it costs nothing.
- You can get your ACN, ABN and register for GST with the Business Registration Service.
- You can also register for GST through the ATO business portal.
The business portal is the main way for businesses to communicate with the ATO. It’s also where you will submit your business activity statements (BAS). You can also submit your BAS via online accounting software.
Other ways to register
- use form NAT 2954 (order it here)
- call the ATO
Once you’re registered for GST
Once you’re registered for GST you need to:
- add GST to your prices
- issue tax invoices to your customers
- keep receipts and invoices to claim back GST on business expenses
- submit business activity statements (BAS) to the ATO
- pay any GST due
Chapter 3: Calculating GST and issuing tax invoices
Working out the amount of GST to add to your goods or services is easier than you think. We’ll show you how to calculate GST and how to add GST to tax invoices.
If you’re a GST-registered business, you must add GST to your prices. You also need to issue GST invoices to customers so they know the amount of GST being added to the bill and the total cost.
Let’s take a look at the maths and requirements of both.
How to add GST to prices
You need to put your prices up by 10%. There’s a very simple formula for doing that.
You can find useful GST calculators on the web; just search for ‘AU GST calculator’. Don’t do this to GST-free products or services that you sell. You can check GST-free items on this ATO page.
What are tax invoices?
A tax invoice tells a customer how much GST they paid on a purchase. It’s important information because some of your customers may be able to claim that tax back. If you’re GST registered, you must issue a GST invoice on request.
A receipt printed at the point of sale is called a tax invoice if it has all of this information. But don’t forget it must contain the words ‘tax invoice’.
Chapter 4: Claiming GST (and input tax credits)
Find out about the GST you can claim back from the ATO on business expenses and on GST you’ve already paid.
GST-registered businesses can claim back the GST they pay on business expenses. And in some cases, you can claim back GST that you’ve already paid to the ATO. Let’s take a look at what you can claim back and how.
When you can claim GST back
You can claim GST back when
- you’ve purchased goods or services for your business (these are called input tax credits)
- a customer leaves you with a bad debt
GST tax credits for business expenses
When you buy something for your business, you’re usually charged GST. If you’re registered for GST, you can claim that back. You do this by claiming a GST tax credit when lodging your business activity statement (BAS). The ATO will balance those credits against the GST you owe when working out your refund or bill.
When expenses are split between business and home
If you bought something for both your business and for private use, you can claim a GST credit for the business portion.
When you’re not collecting any GST
You can claim back GST on supplies even if the end product or service that you sell is GST free.
Claiming back GST on a bad debt
If you account for GST on an accrual basis, you can sometimes get caught out by a bad debt. For example you might raise an invoice and pay GST on the expected income then find your customer doesn’t pay you.
Don’t worry, you may be able to claim back the GST from the ATO on your next return. If the customer pays later, you will repay the GST then.
Chapter 5: Working out your GST refund or payment
Keeping track of the GST you’ve collected and paid is easy with GST accounting. We’ll take you through the basics of bookkeeping and GST accounting.
When submitting a business activity statement – which includes the GST return – most businesses must account for all of their purchases and sales. Let’s take a look at the maths you need to do, and some practical bookkeeping tips.
GST is a simple formula
You work out GST by comparing the amount you paid on purchases to the amount you collected on sales.
You may need to make adjustments for assets, such as a car or computer, that are shared between your business and family. Visit the ATO page on adjusting GST to find out more.
How to work out GST in four steps
- Note the GST paid on your business purchases
- Note the GST collected on sales
- Add both types of GST
- Run the GST formula
Avoid nasty surprises with smart bookkeeping. ,
Like any business, you’ll aim to sell more than you buy. If you succeed in doing that, you’ll most likely end up with a GST bill to pay. Run the four-step GST calculation regularly so you can:
- work out how big your GST payment is shaping up to be
- transfer cash to a separate bank account to cover the GST you’ll need to pay
Chapter 6: BAS: what is it and how to lodge it
There’s no need to feel daunted by business activity statements. We’ll take you through BAS reporting cycles and paying GST.
As a GST-registered business, you’ll need to let the government know how much you’ve collected and how much you’ve paid. You do this by completing a business activity statement (BAS).
Information you will need
You’ll need a record of how much GST you collected on sales and how much was paid on purchases. You won’t need to submit tax invoices when you lodge your GST return, but you will need to have them on hand. The IRD may ask to see them later.
What is a BAS?
A BAS is a form that you fill out between one and twelve times a year, depending on your business size. The ATO uses the information on your BAS to work out your GST refund or bill. It’s also used for business income tax (if you’re in the pay-as-you-go system), employee income tax, fringe benefits tax, luxury car tax, wine equalisation tax, and fuel tax credits.
Information you will need
You’ll need a record of how much GST you collected on sales,and how much was paid on purchases. You won’t need to submit tax invoices when you lodge your BAS, but you will need to have them on hand. The ATO may ask to see them later.
Because your BAS may also be used for other tax reasons, you will probably need to provide extra information about your business, its income, and any employees. Learn more on the ATO page about business activity statements.
How to lodge a BAS
You can lodge your BAS online:
- via your online accounting software
- through your myGov account if you’re a sole trader
- through the ATO’s online business portal
- by having a registered tax or BAS agent (generally an accountant or bookkeeper) submit it for you
What are BAS due dates?
How often you complete a BAS – and when you must submit it – depends on how much business you’re doing. And that’s measured by your annual turnover.
More than $20 million annual turnover
Deadlines: You must submit a BAS within 21 days of the month closing.
Less than $20 million annual turnover
– Quarter 1 (July-September) BAS is due on 28 October.
– Quarter 2 (October-December) is due on 28 February.
– Quarter 3 (January-March) is due on 28 April.
– Quarter 4 (April-June) is due on 28 July.
If your turnover is less than $10 million, you may be able to lodge annually – but you’re still required to pay a quarterly instalment of the GST you owe.
Less than $75,000 annual turnover (or $150,000 for non-profits)
Deadline: Submit with income tax return.