Thursday, 3 Oct 2024
Goods and services tax (GST) is a 10% tax levied on the sale of most goods, services and other items in Australia. Businesses collect this tax from their customers and pay it to the Australian Taxation Office (ATO). Every entity with a GST turnover of $75,000 and above and not-for-profits with a turnover of $150,000 must register for GST. Some other businesses that have to register for GST include those that provide taxi or limousine services and those that want to claim fuel tax credits. The remaining ventures can choose to register or not, depending on their requirements.
The products that do not have GST included in their price are known as GST-free sales. GST–registered businesses can claim credits for the GST they pay while buying materials, services and other supplies for their operations. GST is paid to the ATO on taxable sales at the time of submitting the business activity statement (BAS). Let us help small business owners understand how to calculate GST to comply with the obligations. It allows entrepreneurs to follow the regulations and maintain accuracy.
Most entrepreneurs rely on their bookkeepers in Melbourne to calculate GST. However, small business owners must know how to determine this amount to ensure accuracy, monitoring, and control. The formula for adding GST to sales prices is base price x 1.1 = GST-inclusive price. For example, if the base price of a product is $15, the GST-inclusive sales prices will be $15 x 1.1 = $16.5.
If the business owner wants to calculate the GST added to the base price, they must divide the GST-inclusive price by 11 to get the amount. For example, if the sales price of a product is $44, then the GST added will be $44/11 = $4 and the base price is $40. Entrepreneurs can also use an online GST calculator to ensure accuracy.
The GST turnover of a small business can be determined by identifying the total business income after deducting GST included in the sales price, non-taxable sales, input-taxed sales, and sales from entities not connected to the entrepreneur or Australia. Input-taxed sales are those that do not include GST, and credits cannot be claimed for them. These sales include financial supplies and the sale or lease of a residential property.
Businesses reach the GST turnover threshold if their current and past eleven-month turnover equals $75,000 or higher. Effective bookkeeping helps determine the projected GST turnover and check whether it will reach the threshold. Businesses with their current GST turnover above the threshold do not have to register if the projected turnover is lower.
Small business owners should hire reputed bookkeepers Melbourne to determine their entity’s expected GST turnover. If the business is projected to reach the threshold within 21 days of gaining this information, it must register. Thus, continuous tracking of GST turnover is a must to stay compliant.
Since registration is optional for businesses with a GST turnover lower than the threshold, small business owners can complete the procedure. However, after registering, they must include GST in the sales price, claim GST credits for business expenses, and lodge a BAS.
Small business owners are entitled to claim GST paid while purchasing products and services for the business from the ATO. The money claimed back is known as a GST credit or input tax credit. Entrepreneurs receive a refund if the GST credits are higher than the GST amount paid to the ATO by the business for a given tax period. The GST credits can be claimed by lodging BAS or the annual GST return with the ATO.
Entrepreneurs must provide a complete tax invoice received from the supplier for purchases exceeding $82.50. The suppliers must be registered for GST. The claims should be made only for business expenses and exclude all personal expenses.
Small business owners have to provide a tax invoice to customers within 28 days of receiving the request. Melbourne bookkeepers are responsible for preparing correct and timely invoices that include the sale price, type of sale and the issuing authority.
Tax invoices for taxable sales below $1,000 should include details of the seller, the business’s ABN, the date of issuing the invoice, a description of the purchased item, and the GST amount. Invoices for sales above $1,000 must also include the seller’s information and ABN.
Small businesses with a turnover lower than $10 million can claim concessions like accounting for GST on a cash basis. It ensures the GST is added to products and paid by the business in the tax period when the products are bought and sold. It does not require waiting for the invoices. Another concession is paying GST in instalments in each quarter.
The amount can vary for every payment and can be decided by your bookkeeper in Melbourne. Entrepreneurs who intend to use their purchased items partly for personal use can claim full GST credit by making an adjustment to the account for the personal use percentage at the end of the financial year.
Small business owners must calculate GST and register for it to ensure they are paying correct taxes and can claim GST credits and concessions. It helps to adhere to the tax regulations and maintain accurate records.
