The goods and services tax was introduced on 1st July 2000. Essentially, it is a broad-based tax, currently at 10%, which is charged to almost all goods and services purchased in Australia. There are a number of items which are GST-free, mainly food products (not all food products) and health services.

In order to charge GST and to claim back GST input tax credits, a business must be registered for GST purposes. A business has a choice of registering or not registering for GST if their turnover is less than $75,000. If it chooses not to register then it cannot charge GST nor can it claim back GST input tax credits. In certain situations it may be preferable to become GST registered even when the turnover may be below the $75,000 threshold. This will need to be assessed individually for each client’s circumstances.

Where a business is registered for GST it is required to lodge Business Activity Statements (BAS) on a Monthly, Quarterly or Annual basis.

The BAS reports the particular period’s GST activity for GST collected (on sales) and GST paid (on acquisitions). The BAS also reports PAYG withholding on salaries and wages paid by the business and also PAYG instalments for business or personal income tax where applicable. GST can be reported using the cash or accruals basis of accounting.

If you require assistance in determining which method is right for you come and see us we are able to help.

Important to remember the 10% GST is a tax business collects on behalf of government. It is never yours to keep and must be passed on at the time the BAS is due. Some business can get into financial difficulty where the GST funds have been used by the business in the day-to-day running of the business and is not there when it is due for payment.

Do you still need to be registered for GST?

If your business circumstances change you may not need to be registered for GST anymore. For example:

• selling or closing business (you need to cancel your GST registration within 21 days of the sale or closure)
• business turnover drops below the compulsory threshold, unless you’re a taxi driver
• change of business structure, for example from a sole trader to a company

Cancelling your GST registration can save you time and effort because some other registrations automatically cancel at the same time, including:

• luxury car tax (LCT)
• wine equalisation tax (WET)
• fuel tax credits (FTC)

Before cancelling your GST registration, check that you have finalised all of your tax obligations.

When electing to cancel a GST registration, consideration must be directed towards whether a GST adjustment is required to be made in respect of any creditable acquisitions that may have been made over the preceding one to ten adjustment periods.

We at Carmelo Mirabile & Co can assist you with budgeting and cash flow projections to avoid these pitfalls and in determining any adjustments that may be required.