There are two scenarios in which you may register to collect and pay Goods and Services Tax (GST) in Australia:
- You are required to.
- You do so voluntarily.
When You Are Required to Register for GST
The rules governing whether you are required to register for GST are straightforward. If one of the following rules applies, you must register for GST:
- If the annual GST turnover of your enterprise is $75,000 or more.
- If the annual GST turnover of your non-profit organisation is $150,000 or more.
- If you own or lease a taxi or limousine service and collect fares from passengers as part of your business. There is no GST turnover threshold.
- If you want to claim fuel tax credits.
You May Voluntarily Register for GST
If your business does not fit into any of the above categories, you may decide to collect and pay GST voluntarily. One reason for doing so is that you may be financially better off.
For example, if you run a small business with an annual GST turnover of less than $75,000, you may decide to register for GST because you want to claim back the GST paid on expensive equipment purchases. The amount of GST credits you want to claim back may be substantially more than the GST you will pay on your sales income. In this case, you may be financially better off registering for GST even though your annual GST turnover is less than $75,000.
If you do register for GST voluntarily, you are generally required to remain registered for one year. This means you should carefully calculate the benefit of claiming GST credits against the GST you will pay the government on your income.
How to Calculate GST Turnover
The annual GST turnover of your enterprise is used by the Australian Taxation Office (ATO) to assess whether or not you should register for GST. Your business’ GST turnover may be different from your regular turnover as it is calculated in the following way:
- Start with the total GST included in your sales and other revenue for the year.
- Subtract sales not for payment and not taxable.
- Subtract sales not connected with your business.
- Subtract input-taxed sales.
- Subtract sales not connected with Australia.
The resulting number is your annual GST turnover.
Sole Trader, Partnership, Company
Determining whether or not to pay GST does not depend on the structure of your business. There are no specific rules for sole traders, partnerships or companies. Your business’ GST turnover is the main factor to assess when deciding whether or not to register for GST.