GST registration: when you must register, and when it pays to

GST registration is compulsory once your turnover hits a threshold, but plenty of businesses register before they have to — and some that must register don't realise it until the ATO writes to them. This guide covers the tests, the deadline, what changes once you're in the system, and how to think about registering voluntarily.

When you must register

You must register for GST when:

• your business has a GST turnover of $75,000 or more;
• you start a new business and expect to reach $75,000 in the first year;
• you're a not-for-profit organisation with GST turnover of $150,000 or more;
• you provide taxi, limousine or ride-sourcing travel for passengers — regardless of turnover, from the first dollar, whether you own or lease the vehicle; or
• you want to claim fuel tax credits.

Outside those situations, registration is optional. You need an ABN before you can register, and you only register once even if you run several businesses under the same ABN.

What counts as GST turnover

GST turnover is your gross business income, not profit, minus GST you've included in sales, input-taxed sales, sales not connected with Australia, and sales to associates for no payment. Two tests apply, and you reach the threshold if either is met:

• Current GST turnover — this month plus the previous 11 months totals $75,000 or more.
• Projected GST turnover — this month plus the next 11 months is likely to be $75,000 or more.

Projected turnover excludes one-off amounts such as selling a capital asset or winding down the business. If your current turnover is over the line but the ATO is satisfied your projected turnover will fall below it, you don't have to register. In practice this means checking each month, not just at 30 June.

The 21-day rule

Once you're required to register, you have 21 days to do it. If you don't, the ATO can require you to pay GST on sales made from the date you should have registered — even if you never charged it — along with penalties and interest. One-eleventh of a year's sales is a painful bill to fund out of your own pocket, which is why the monthly check matters.

What changes once you're registered

• Pricing. You add 10 % GST to taxable sales. Whether you can pass it on, or have to absorb it, depends on your customers.
• Tax invoices. If a customer asks, you must provide a tax invoice within 28 days for any sale over $82.50 including GST. It must show that it's a tax invoice, your identity and ABN, the date, a description and the GST amount (or a statement that the total includes GST). Sales of $1,000 or more must also show the buyer's identity or ABN.
• Input tax credits. You claim back the GST in business purchases. You need a tax invoice to claim, except for purchases of $82.50 or less, and you have four years to claim a credit.
• BAS cycle. Most small businesses lodge a quarterly business activity statement. Monthly reporting is compulsory at $20 million of GST turnover. If you registered voluntarily and your turnover is under $75,000, you can choose to report annually.
• Cash or non-cash accounting. Businesses with aggregated turnover under $10 million can account for GST on a cash basis — you report GST when money is received or paid, which keeps your BAS liability aligned with your bank balance. Larger businesses, and anyone who prefers it, use the non-cash (accruals) basis, where GST is accounted for when an invoice is issued or received. Most of our small business clients use cash.
• Record keeping. Your bookkeeping needs to split GST correctly on every transaction, including GST-free and input-taxed items.

GST-free versus input-taxed

Not every sale carries GST. The distinction matters because it decides whether you can claim credits:

• GST-free sales — most basic food, some education and medical services, exports, farmland and the sale of a business as a going concern. You don't charge GST, but you can claim credits on the purchases used to make those sales. A GST-registered farmer or health practitioner is often in a refund position for that reason.
• Input-taxed sales — residential rent and financial supplies. You don't charge GST and you can't claim credits on related purchases. Input-taxed sales are also left out when working out your GST turnover.

Voluntary registration: when it pays

Registering below the threshold is a judgment call. Reasons to do it:

• Your customers are mostly GST-registered businesses who claim the GST back, so adding it to your price costs them nothing.
• You're buying equipment, a vehicle or stock and want the credits now rather than later. (Credits on purchases made before you registered are generally not available.)
• Your sales are GST-free, so registration brings refunds without raising your prices.
• You expect to pass $75,000 soon and would rather set up invoicing and bookkeeping once.

Reasons to wait:

• Your customers are private individuals who can't claim GST, so registration either raises your prices by 10 % or cuts your margin.
• You have few GST-bearing purchases, so the credits are small.
• You'd rather not take on a BAS each quarter yet. Once registered voluntarily you generally must stay registered for at least 12 months.

Cancelling your registration

You (or your registered agent) must cancel within 21 days of selling or closing the business, or changing structure. You can choose to cancel if your turnover is below the threshold — unless you provide taxi or ride-sourcing travel, in which case you stay registered. Cancelling GST also cancels fuel tax credit, luxury car tax and wine equalisation tax registrations, and you can't cancel retrospectively for a period in which you kept trading on a GST-registered basis. If you're closing the business altogether, the ABN must be cancelled within 28 days as well. A final BAS, and an adjustment for assets you keep, usually follow.

Sources

• ATO — Registering for GST
• ATO — Tax invoices
• ATO — Choosing an accounting method for GST
• ATO — When and how to report and pay GST
• ATO — GST-free sales
• ATO — Input-taxed sales
• ATO — Cancelling your GST registration