Also known as the “Goods and Services Tax,” GST as Investopedia would define it is a “value-added tax levied on most goods and services sold for domestic consumption.”
The tax is ultimately paid by consumers, which is then remitted to the government by the businesses selling the goods and services.
As a result, GST provides revenue for the government.
In Australia, GST is a broad-based tax of 10% on most goods, services and other items sold or consumed in the country.
GST applies to most businesses in Australia, collecting it for the government whenever they sell products and services and pay this revenue to the Australian Taxation Office (ATO).
In return, the government distributes this money to its states and territories to finance public services and infrastructure, such as hospitals, roads and public schools.
Most basic foods, some education courses, and some medical, health and care products are exempt from GST.
GST was introduced on July 1, 2000, replacing a range of existing state and federal taxes, duties and levies.
GST or Goods and Services Tax is an indirect tax payable by the suppliers of certain goods and services.
Business owners registered to pay GST initially need to assess whether their goods and services are taxable, because they cannot charge their consumers this type of tax if their goods and services are GST-free or input-taxed.
They can charge their consumers GST by adding a 10% flat fee on top of the price they charge for their goods and services.
GST: How it works?
The GST system, as how the Commonwealth of Australia executes it, “operates at each step of the manufacturing, wholesale and retail process, with each participant ultimately collecting a portion of the total GST during their specific transaction and remitting it to the ATO. Total GST collected is made available to the Federal Government to apportion amongst the States and Territories in line with specific agreements.”
Use the GST calculator on the MoneySmart website to work out how much GST to include in your prices.
Who needs to pay this tax?
GST is payable by the suppliers of certain goods and services. You will need to register for GST if:
- Your business or enterprise has a GST turnover of AU$75,000 or more.
- You’re a non-profit organization and have a business turnover of at least $150,000 per year or more.
- You provide taxi travel or limousine travel services (including ride-sourcing) as part of your business, regardless of your GST turnover. (This rule also applies to both taxi owner drivers and people who just rent a taxi.)
- You want to claim fuel tax credits for your business or enterprise.
Note: It is optional to register for GST if you don’t fit into one of these categories. However, if you choose to register, you must stay registered for at least 12 months.
For those overseas businesses selling imported services or digital products to Australian consumers and make over AU$75,000. Better consider registering for GST.
- Digital products (i.e. streaming or downloading of movies, apps, games and e-books).
- Imported services such as architectural or legal services.
As of July 1, 2018, there’s a need to register for GST if you’re an overseas business making over AU$75,000 and sell low value imported goods to Australian consumers. This will affect goods valued at AU$1000 or less on items like:
- Books; and
- Electrical appliances.
How to register for GST?
If you qualify to one of the above criteria, you are required to register for GST.
To register for GST, you will need an Australian Business Number (ABN).
Once you have an ABN, you can register for GST:
- via the ATO’s Business Portal;
- by calling the Australian Taxation Office (ATO) on 13 28 66; or
- through your registered tax agent or Business Activity Statement (BAS) agent.
Step 2: Once your business is registered for GST, you are required to pay GST on all goods and services you provide unless they are GST-free or input-taxed.
You can pass on the cost of GST by:
- Adding the flat 10% GST to the price you charge to your goods and services to your costumers plus an extra 10% (the GST component).
- Claiming credits for the GST included in the price of goods and services you buy for your business.
Note: Businesses that charge GST must send the GST amount to the Australian Taxation Office (ATO). You may be required to transfer the GST amount to the ATO monthly, quarterly or annually depending on your business’s GST turnover.
If you have customer overseas, you do not have to charge your customers GST because export products are generally GST-free. However, you can still claim for a refund for the GST you paid for any input materials purchased.Nonetheless, you will still need to pay for GST in some circumstances.
Step 3: After the end of each business quarter, you need to complete a Business Activity Statement (BAS) and lodge it with the ATO.
In your BAS, you need to report the amount you have collected from your consumers as GST and pay the equivalent amount to the ATO.
Note: You can lodge your BAS online, by mail or over the phone (if you have a nil lodge), and pay online, by mail or in person at an Australia Post outlet.
For more inquiries regarding GST, you can visit the ATO website about GST and excise concessions for small businesses.
For checklists on assessing your GST compliance and risk management processes, download the ATO’s GST Governance and Risk Management Guide.
Learn more about registering for GST, including helpful videos, on the ATO website.
For more personal advice about your business and tax, consult your accountant.
By Tuan Nguyen