As a small business owner, managing your financial obligations is crucial, especially when it comes to GST (Goods and Services Tax). GST is a 10% tax applied to most goods, services, and items sold or consumed in Australia.
Initially, you may not have needed to register for GST, and you might have chosen not to voluntarily register. However, as your business grows and your GST turnover exceeds the threshold (currently $75,000 or $150,000 for not-for-profits), you will be required to register for GST.
Here are some key tips to help you manage your GST responsibilities effectively.
- Register for GST on Time
It’s essential to keep track of your GST turnover each month to monitor your progress towards the registration threshold. Once your turnover hits $75,000, you must register for GST within 21 days to avoid penalties and prevent being responsible for GST that should have been covered by your customers.
- Pre-Establishment Costs
If you’re starting a new business, you can claim GST credits for certain expenses incurred before your business is officially registered, such as set-up fees, business registration, trading stock, and premises costs. Be sure to consult your accountant to understand the specific rules that apply to these expenses.
- GST-Free and Input-Taxed Sales
Certain products and services are GST-free or Input-Taxed. Key points to remember:
- If your sale is GST-free, you don’t include GST in the price but can still claim GST credits on purchases used to make these sales.
- You cannot claim GST credits for purchases like basic foods, loan interest, or bank fees, and you should always check your invoices carefully to ensure you’re claiming GST correctly.
Check out a list of common GST-free products and services on the ATO site here.
- Avoid Claiming GST on Private Expenses
GST credits can’t be claimed for private or personal expenses. If you make a purchase that is partly for business and partly for personal use, only claim the business portion of the GST.
- GST Credits for Employee Reimbursements
You can claim GST credits when reimbursing employees for business-related expenses, as long as you have a tax invoice for expenses over $82.50 (GST-inclusive). However, you cannot claim credits for non-deductible expenses, such as client entertainment costs.
- Keep Accurate Records
Maintaining accurate records is essential for managing GST. This includes all sales, tax invoices, expenses, and other GST-related transactions. Make sure to keep these records for at least five years, starting from when they were prepared or when the transaction occurred.
Conclusion
Managing GST can be straightforward when you start with the right approach and stay on top of it regularly. Consult a professional to ensure you’re following the proper procedures for registration, claiming credits, and lodging returns.
Need help with GST or BAS? Contact us today, and we’ll guide you through the process!
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