GST or Goods and services tax. During Tax season, These two words are discussed in all business owners’ communities.
What is GST and its partner BAS?
Simply put, BAS and GST are like vegemite and butter on toasted bread or how profitbooks are for your business needs.
You get the point, both of these things are interconnected and important to each other.
In the blog post, we will be talking about these two important things. By these two we mean GST and BAS and not vegemite on buttered toast. ( because it’s a delicacy no matter what the world says.)
Let’s understand GST and BAS and their connections and get prepared for the EOFY.
What is GST
As a business owner, you have many questions on your mind. Like will my company will be successful? can I get accounting software that will last me a lifetime? ( which you can with profitbooks just FYI)?
During Tax season, you are only worried about how to pay it on time. What are Tax liabilities and most important of them all What is GST?
Will GST is a value-added tax imposed on most goods and services consumed or sold in Australia. It is a broad-based tax of 10% on the price of goods and services at each stage of production and distribution.
As a business owner, I am responsible for collecting GST from my customers on behalf of the Australian Taxation Office (ATO) and remitting it to them.
Every business that has qualified for the goods and services tax bracket is obligated to pay these taxes to the government.
And just like your school cricket team, there is a qualification bracket.
GST qualification bracket.
In Australia, a business is required to register for Goods and Services Tax (GST) if its annual turnover meets or exceeds the GST registration threshold. The Australian Taxation Office (ATO) reviewed regularly the threshold which may change over time.
As of my knowledge cutoff in September 2021, the current GST registration threshold is $75,000 in annual turnover. This means that if your business’s projected or actual turnover for the financial year exceeds $75,000, you are required to register for GST.
It’s important to note that turnover refers to the total sales or income generated by your business before deducting any expenses.
However, there are different rules for certain types of businesses:
- Non-profit organizations: Non-profit organizations have a higher GST registration threshold. If your non-profit organization’s annual turnover is less than $150,000, you are not required to register for GST.
- Taxi and ride-sharing drivers: If you provide taxi or ride-sharing services, you must register for GST regardless of your turnover.
- Businesses in the taxi and limousine industry: Businesses operating in the taxi and limousine industry must register for GST, regardless of their turnover
Once you are qualified for this bracket, the other important thing you have to take into consideration is the BAS or a business activity statement.
What is a BAS?
A Business Activity Statement (BAS) is a comprehensive form used to report various tax obligations to the Australian Taxation Office (ATO). It encompasses GST, Pay You Go (PAYG) withholding, Payroll Tax, and Fringe Benefits Tax (FBT). GST, being a key component, is reported and reconciled on the BAS.
Relation Between BAS and GST
The BAS form has specific sections to report GST-related information, such as total sales, GST on sales, capital purchases, GST on purchases, and more. These sections allow businesses to calculate their GST liability or refundable amount accurately.
In the Australian tax system, a GST credit, also known as a Goods and Services Tax credit or input tax credit, refers to a credit that businesses can claim for the GST they have paid on purchases or expenses related to their business activities.
When a business purchases goods or services, they generally pay GST on those transactions. The GST credit allows businesses to claim a credit for the GST they have paid on these purchases and deduct it from the GST they collect from their customers.
This mechanism ensures that businesses are not double-taxed on their purchases.
To be eligible for a GST credit, the following conditions must be met:
- The business must be registered for GST with the Australian Taxation Office (ATO).
- The purchase must be made to carry on the business.
- The business must have a tax invoice for the purchase, which includes the supplier’s Australian Business Number (ABN) and the amount of GST paid.
When lodging the business activity statement (BAS) with the ATO, businesses can claim the GST credits by reporting the total GST they have paid on purchases under the “GST on purchases” section.
The claimed GST credits are then offset against the GST collected on sales, resulting in either a GST refund or a reduced amount of GST payable.
Businesses need to maintain proper records, including tax invoices and receipts, to support their GST credit claims. The ATO conducts periodic audits to ensure that GST credits are claimed correctly and by the law
Tax season should partner itself with the coffee industry, as we are pretty sure people drink most of their coffee slot during tax season, as it’s so overwhelming time. In this stressful time, information of what is your tax bracket and how to pay them are very important.
To future relieve your stress, you can also invest in accounting software like Profitbooks. This will not only help you during tax season but help you with your business’s long-term financial health.
Profitbooks is very user-friendly and has “lifetime” deals at a very small and convent price.
Visit our website and sign in to your business today.
What are the benefits of registering for GST?
There are several benefits to registering for GST, including:
- You can claim GST on your business expenses.
- You can reclaim GST on imported goods and services.
- You can make GST-inclusive sales, which can make your business more competitive.
- You can use the GST-free threshold to reduce your GST liability.
7. What are the drawbacks of registering for GST?
There are a few drawbacks to registering for GST, including:
- You have to collect GST from your customers.
- You have to pay GST to the ATO.
- You have to lodge BAS returns each quarter.
- You have to keep GST records.
8. What are the different types of GST registrations?
There are three different types of GST registrations:
- Standard registration: This is the most common type of registration. It applies to businesses with a turnover of more than $75,000 per year.
- Reduced registration: This type of registration applies to businesses with a turnover of between $150,000 and $750,000 per year.
- Non-profit registration: This type of registration applies to non-profit organizations.
9. What are the penalties for not registering for GST?
If you are required to register for GST and you do not, you may be subject to penalties. These penalties can be up to $22,000 for each month you are not registered.
10. What are the consequences of not lodging my BAS?
If you do not lodge your BAS on time, you may be subject to penalties. These penalties can be up to $22,000 for each month your BAS is late. You may also be required to pay interest on any outstanding GST.