Do I need to register for GST?

You must register for GST once your GST turnover reaches $75,000 in a rolling twelve-month period, or as soon as you expect that it will. Once you cross that line you have 21 days to register. Below the threshold registration is optional — and it is a genuine trade-off, not an obvious yes. Rideshare and taxi drivers are the exception: they must register from their first fare regardless of turnover.

What counts towards the $75,000?

Two things trip people up here. The first is that it is turnover, not profit. It is your gross business income before expenses — so a courier who invoices $90,000 and spends $40,000 on fuel and vehicle costs is over the threshold, not under it.

The second is that it is not the financial year. The test runs over any twelve consecutive months, and it works in both directions: the current month plus the previous eleven, and the current month plus the next eleven if you expect to reach it. Signing a contract in March that will obviously take you past $75,000 means you register in March, not in July when the total finally arrives.

A few things are excluded from GST turnover, including input-taxed sales such as residential rent and most financial supplies, and sales that are not connected with Australia. If a large part of your income is in one of those categories, check the position rather than assuming.

The mistake that costs the most

If you were required to register and did not, the ATO can backdate your registration to the date you should have registered. From that date you owe the GST on everything you sold — whether or not you charged it. Nobody is going to reissue your invoices, so that GST comes out of money you have already spent, and penalties and interest can apply on top.

This is why the rolling twelve-month test is worth watching monthly rather than checking once a year. The threshold does not care that you only noticed in June.

Should I register voluntarily?

Under the threshold it is your decision. The honest answer depends almost entirely on who your customers are.

Reasons to register early

• You can claim back the GST on what you buy. Tools, materials, a vehicle, stock, software — that is 1/11th of every GST-inclusive purchase back. For a trade buying equipment in the first year, this can be significant.
• Your clients are GST-registered businesses. If they claim the GST back, your prices going up 10% costs them nothing. You get the credits and they are indifferent.
• You will cross the threshold soon anyway. Registering before you get there avoids having to raise every price by 10% partway through the year, which is a conversation with every client at once.

Reasons not to

• You sell to consumers. A household cannot claim GST back, so your price either rises 10% or your margin falls 10%. Against an unregistered competitor you are simply dearer.
• You take on a BAS every quarter. Registration means lodging a Business Activity Statement each period, including nil ones, for as long as you are registered.
• You are locked in for a year. Register voluntarily and you generally have to stay registered for at least twelve months before you can cancel.

A rough test: if most of your income comes from businesses and you buy a lot, register. If most of it comes from households and you buy little, wait until you have to.

How to register

You need an ABN first — GST registration is attached to it. With that in hand there are four routes, and all of them are free:

• At the same time as your ABN application, which is the least work if you already know you need it.
• ATO Online services for business, using myGovID.
• Through myGov if you are a sole trader with your ATO account linked.
• Through a registered tax or BAS agent, who can do it as part of setting you up.

You will be asked for a start date and a reporting cycle. Most small businesses report quarterly, and most choose to account for GST on a cash basis, which means you only remit GST once you have actually been paid — subject to the turnover limits for that method.

What changes once you are registered

• You add 10% to your taxable sales and that GST is not yours — you are holding it for the ATO. Keep it somewhere other than your working account.
• Your invoices must be tax invoices. There is a specific list of things one has to show, and clients cannot claim their credit without it — the seven required elements are here.
• You claim GST credits on business purchases from other registered suppliers, to the extent the purchase is business use.
• You lodge a BAS every period, including periods with no activity — what a BAS asks for is here.

The arithmetic itself is where most errors start: the GST inside a GST-inclusive price is the total divided by 11, not 10% taken off the top. The GST calculator handles both directions, and Balaana tracks GST collected and paid on the free plan so the quarterly totals are already there.

Cancelling your registration

If you stop trading, or your structure changes, you must cancel your GST registration within 21 days. If you have simply dropped below the threshold you may cancel voluntarily — subject to the twelve month minimum if you registered voluntarily in the first place. You cannot cancel to avoid a BAS you have already incurred, and you may have to make adjustments for assets you still hold and claimed credits on.

Related reading

• What is a BAS? — what registration commits you to each quarter
• How to start a business in Australia — where GST sits in the order
• How to get an ABN — the registration GST attaches to
• GST calculator — add or remove GST correctly
• Cash vs accrual accounting — the method you choose when you register
• What is an invoice? — what changes on your invoices once you are registered

Sources

Thresholds, timeframes and registration rules in this article come from the Australian Taxation Office. They change — confirm the current position at ato.gov.au or with a registered tax or BAS agent. Balaana is bookkeeping software, not a tax agent — this article is general information, not personal tax advice.