For many businesses invoicing customers for the first time, you may be wondering if you should include GST in your prices.
Regardless of whether you charge GST or not, you should always be clear about this with your customers, and state whether GST is being charged on your invoices.
Here’s a guide to when you should include GST in your prices, and the potential benefits of registering for GST even when you don’t strictly need to.
What Is GST?
The Goods and Services Tax (GST) is a 10% tax on goods and services sold or supplied in Australia. It was introduced in 2000 by the Howard Government.
Do I Have To Register For GST?
According to the ATO, you must register for GST if;
- Your annual business income is $75,000 + a year, or it will likely be this amount if estimating
- Your annual business income is $150,000 + a year and you’re a non profit organisation
- You want to claim tax fuel credits
- Your business administers a taxi service
If you don’t fit into the above, you have a choice on whether you want to register for GST.
Benefits Of Registering For GST When You Don’t Need To
There are several benefits associated with registering for GST when you don’t strictly have to.
For starters, you can claim GST credits for purchases related to your business. You can only do this if you’re registered for GST.
If your business is expected to grow, and you create a customer expectation that your goods or services cost a certain amount, what happens when you suddenly need to pay GST? If you have to charge your customers 10% extra, this could create resentment among your existing customer base.
It may be beneficial to just charge GST from the very start to get into the habit of book keeping for GST, and to get your customers familiar with how much your goods or services will cost. It may be handy to use accounting software, like Thriday, which automatically tracks your GST and tax obligations making it easy to stay compliant.
Finally, if you’re a start up and want to look really successful from the get go, you might consider registering for GST even though you don’t have to yet.
Downsides To Voluntarily Registering For GST
Registering for GST increases your paperwork. Although, if you earn less than $75,000 a year and are voluntarily paying GST, you’ll only need to lodge a Business Activity Statement once a year (rather than 4 times a year for most GST charging entities).
Having to pay GST to the ATO can also cause cash flow troubles as, for some time before you transfer it, that 10% tax is sitting in your business’ bank account.
Need Legal Help With Setting Up Your Business?
As a legal service, we can’t give tax advice, but if you need help with any other legal aspect of setting up your business, we’re here to help!
If you want to speak with a lawyer about what sort of business structure you need, or if you need help registering a company or drafting contracts, feel free to get in touch with us on 1800 730 617 or at firstname.lastname@example.org. We’re available any time for a free consult.
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