Running a small business in Australia comes with many responsibilities, and understanding your taxes is one of the most important parts. If you sell goods or provide services, you need to know about GST. Many small business owners find it confusing at first, but once you learn how it works, it becomes easy to understand. This guide will help you understand what GST means, how it works, and how you can easily handle it for your business.
What is GST?
GST stands for Goods and Services Tax (GST) in Australia, which is a 10% tax added to most goods and services sold in the country. It is a government tax that is collected by businesses from customers and then paid to the Australian Taxation Office (ATO). This means that when a customer buys something, they pay a little extra, and that extra money goes to the government through the business.
For example, if you sell a product for $100, you add $10 as GST, so the customer pays $110. Later, you report to the ATO and pay that $10.
Who needs to register for GST?
Not every business needs to register for GST. You only need to register if your business turnover is $75,000 or more in a year. For not-for-profit groups, the limit is $150,000. If your earnings are less than that, you can still voluntarily register, which can sometimes help your business look more professional.
You can register for GST online through the Business Registration Service or the Australian Business Register (ABR). Once registered, you will receive a GST number linked to your Australian Business Number (ABN).
How GST works
Here’s how GST works in simple steps:
- You charge GST on the goods or services you sell.
- You pay GST when you buy goods or services for your business.
- When you report to the ATO, you deduct the GST you paid from the GST you collected.
- You then pay the remaining amount to the ATO or claim a refund if you paid more GST than you collected.
This process is usually quarterly, but some small businesses report monthly or annually.
How to calculate GST
Calculating GST is easy once you know the basic formula.
- To add GST to a price: multiply the amount by 1.1 (example: $110 ÷ 11 = $10).
- To find the amount of GST: divide the price by 11 (example: $110 ÷ 11 = $10).
- To remove GST from the price: divide by 1.1 (example: $110 ÷ 1.1 = $100).
It’s always a good idea to use accounting software that automatically calculates GST, such as Xero or QuickBooks. This will save you time and reduce errors.
How to use the weekly tax table
If you have employees, you should also handle their income tax correctly. The Australian Taxation Office provides a weekly tax table that helps you calculate how much tax to deduct from your employees’ salaries before paying them their wages. Learning how to use the weekly tax table is important because it ensures that you don’t overpay or underpay tax on behalf of your employees.
You can find the tax table on the ATO website. The table shows how much tax to withhold based on how much an employee earns each week. You should check the appropriate column based on the worker’s earnings, their tax-free threshold claim, and whether they have other deductions. It can seem a little confusing at first, but once you use it regularly, it becomes easy to follow. Many businesses now use payroll software that automatically applies weekly tax rates, saving time and reducing errors.
GST return and BAS
Once you register for GST, you will need to submit a Business Activity Statement (BAS) every month, quarter or year, depending on the size of your business. In the BAS form, you report how much GST you have collected from customers and how much you have paid on business expenses.
You can file your BAS online through the ATO portal or through your tax agent. Always keep your invoices, receipts and financial records in order so that it is easy to fill out your BAS correctly. Keeping proper records will also help you avoid any problems if the ATO audits your business.
Common GST mistakes to avoid
Small business owners often make some common mistakes when dealing with GST. Here are some to avoid:
- Forgetting to register when turnover is over $75,000.
- Not keeping the right invoices and receipts.
- Mixing up personal and business expenses.
- Forgetting to include GST in your selling price.
- Missing the BAS deadline.
Avoiding these small mistakes can save you from paying a penalty or losing money.
GST for online and service businesses
Many new businesses in Australia operate online or provide digital services. If you sell online or provide digital services, you still need to include GST on your invoices if your turnover is above the threshold. This includes e-commerce sellers, freelancers and service providers. Always include your ABN and GST amount on your invoices.
Teachers’ tax claim
If you are a teacher, you can claim certain work-related expenses when filing your tax return. Teachers’ tax claims include things like buying teaching materials, paying for professional development courses and travelling expenses for school activities. To make these claims, you must keep receipts for all work-related expenses. This helps you reduce your taxable income, which means you can get a refund or pay less tax.
Why GST is important for small businesses
Understanding and managing GST is a big part of running a successful small business. It shows that your business is legitimate and builds trust with your customers and suppliers. It also helps you stay on the right side of the law and avoid any financial trouble with the ATO.
Final thoughts
GST can seem complicated, but once you understand it, it’s a simple system. Register your business if necessary, charge GST correctly, keep clean records and submit your BAS on time. Managing GST correctly helps your business stay compliant and run smoothly.
When you know how GST and the tax systems work, you can focus more on growing your business with confidence and less on worrying about tax issues.
