GST - Goods and Services Tax

Australia, the Goods and Services Tax, commonly known as GST, is a 10% value-added tax enforced on the majority of goods and services transactions.

In Australia, the Goods and Services Tax (GST) is a widespread 10% levy on many products, services, and other items purchased or consumed. On July 1, 2000, the Howard government put this tax system into effect. It is a major component of the Australian tax system and impacts almost every small business in some way.

Understanding GST is crucial for small business owners, as it can affect their pricing, cash flow, and reporting obligations. This article aims to provide a comprehensive overview of GST, its implications, and how it operates in the context of Australian small businesses.

GST Implications for Small Businesses

Pricing: Businesses must add the 10% GST to the price of their products and services. This can impact cash flow, as businesses must collect GST from customers and pay it to the Australian Taxation Office (ATO).
Cash flow: GST can impact cash flow, as businesses must collect GST from customers and pay it to the ATO. This can be a challenge for small businesses, especially those with irregular or seasonal income.
Reporting obligations: GST has reporting obligations, as businesses must lodge a Business Activity Statement (BAS) with the ATO. This can be a complex and time-consuming process, especially for small businesses that do not have the resources to hire an accountant.

Calculating GST

Adding GST to a price (GST-exclusive price):

Multiply the original price by 1.1: This will give you the total price including GST. Example: A product costs $100 before GST. To find the price including GST, multiply $100 * 1.1 = $110
Finding the GST amount from a GST-inclusive price:

Divide the total price by 11: This will give you the amount of GST included in the price. Example: A product costs $110 including GST. To find the GST amount, divide $110 / 11 = $10
Finding the original price (GST-exclusive price) from a GST-inclusive price:

Divide the total price by 1.1: This will give you the original price before GST was added. Example: A product costs $110 including GST. To find the original price, divide $110 / 1.1 = $100

GST Exemptions and Concessions

There are a number of goods and services that are exempt from GST, including:

Food: Most food items are exempt from GST, with the exception of restaurant meals and takeaway food.
Healthcare: Most healthcare services are exempt from GST.
Education: Most education services are exempt from GST.
Financial services: Most financial services are exempt from GST.

There are also a number of concessions available for small businesses, including:

The GST threshold: Businesses with an annual turnover of less than $75,000 are not required to register for GST.
The simplified GST scheme: Small businesses with an annual turnover of less than $1 million can elect to use the simplified GST scheme. This scheme allows businesses to calculate their GST liability on a cash basis, rather than an accruals basis.

GST and the ATO

The ATO is responsible for administering the GST. Businesses must lodge a BAS with the ATO every quarter or month, depending on their turnover. The BAS is used to calculate the amount of GST that the business owes.

Businesses that fail to comply with their GST obligations may be subject to penalties. These penalties can be significant, so it is important for businesses to understand their GST obligations and to comply with them.GST Resources

There are a number of resources available to help businesses understand and comply with their GST obligations, including:

The ATO website: The ATO website has a wealth of information about GST, including guides, fact sheets, and videos.
The GST hotline: The ATO GST hotline is available on 13 28 66 to answer any questions that businesses have about GST.
Accountants: Accountants can help businesses with their GST obligations, including preparing and lodging BASs.