Understanding what goods and services tax, GST for short, is and how to work out how much to charge customers is crucial when starting a business in Australia. This is why we've compiled this brief guide to GST in Australia.
Goods and services tax - explained
The GST is the Australian equivalent of VAT. It is a tax imposed on the sale of most goods and services. GST for companies in Australia is 10%. However, it is advisable for you as a business owner to check the GST regularly to account for any changes made by the government. If your business has a GST turnover of AUD 75,000 or you are a non-profit with a turnover of AUD 150,000, you want to claim fuel tax credits, or your business provides taxi or limousine travel, you will need to register for GST.
How to register
If your business must register for GST, you have to undertake the registration as soon as possible. Registration can be done online, via phone, and by a registered agent. You only need to register once; however, if you do not register even though you are required to, you could end up having to back pay GST on all goods and services sold in the period from when you should have registered. In addition, you may also have to pay penalties. All goods and services sold are taxable (unless they're GST-free or input taxed). Exemptions include eg most basic food items, some medical/health services, and some educational courses.
Invoicing for tax
Using tax invoices, you tell clients how much GST is paid on a sale of a good or service. Because your clients may be able to claim some of this back, it is essential to show GST on invoices. Tax invoices are provided whenever you make a taxable sale that comes out to more than AUD 82.50 (including GST). A lot of different information is required for any invoice under AUD 1,000, including the seller's identity and ABN, description of items sold, GST payable, extent to which the sale includes GST, notation of the document being a tax invoice, and invoice date. Invoices for over AUD 1,000 are slightly different - they require the buyer's identity/ABN.
The formula for GST is as follows: Original Price x 1.1 = GST-Inclusive Price.
There are several free tools available online to calculate the GST for Australia.