What is GST
GST is a tax on the supply of goods and services in Australia by a registered person/entity on any taxable supply they make. GST is payable by the supplier, and is usually collected from the person to whom the goods are supplied (typically a consumer of the goods). The current rate of GST is 10% although, from time to time, there are proposals or calls to increase the rate. Whilst most supplies attract GST, some supplies are exempt because they are either input taxed or GST-free.
When to register for GST
An enterprise (e.g. business) must register for GST if gross annual turnover exceeds $75,000 (which is increased to $150,000 for endorsed not-for-profits). However, an enterprise can voluntarily register for GST if gross annual turnover is less than $75,000, and there may be good reasons why your business should voluntarily register, even from the very first day of trade (or perhaps before trade commences). As usual, there are some exceptions regarding registration – an example is taxi owners who must register for GST regardless of turnover.
Cash or accrual accounting and reporting?
Businesses whose turnover is more than $2 million should account for GST on accrual basis. This is often referred to as ‘non-cash’ basis.
Businesses whose turnover is less than $2million, can choose to account for GST on cash or accrual basis. Whatever method you choose, you cannot change during the financial year.
If you account on a cash basis, you will:
• record all income when received not when the invoice is raised; and
• record all expenses when amount is paid and not when supplier invoice is received.
If you account on a non-cash (accruals) basis, you will:
• record all income when an invoice is issued; and
• record all expenses when supplier invoice is received.
When do you need to lodge a BAS?
Businesses whose annual turnover is more than $20 million should lodge and pay the amount due on their BAS monthly. If your annual business turnover is less than $20 million, and ATO has not told you to report monthly, then you can report and pay quarterly (although you may still need to lodge and pay PAYG withheld monthly). Most small business owners prefer reporting quarterly.
The quarterly lodgement dates are as follows:
|1||1 July - 30 September||28 October|
|2||1 October - 31 December||28 February|
|3||1 January - 31 March||28 April|
|4||1 April - 30 June||28 July|
Any lodgement delays or non-payment could result in general interest charges and/or penalties. Therefore, it is important to keep above dates in mind to avoid any penalties imposed. If you use the services of a registered tax agent, you may have the benefit of the deferred lodgement program which generally provides you with an extra month on the above due dates.
What about Superannuation?
Businesses usually need to pay superannuation contributions for their employees, although some limited exceptions apply. It is important to note that the obligation to pay superannuation can extend to some contractors, too. Usually, superannuation contributions need to be paid at least 4 times during the year, and the payment cut-off dates correspond to the BAS due dates except for the period 1 October to 31 December – whilst the BAS is not due until 28 February, the superannuation contributions for that period are due on 28 January. If contributions are not paid by this date, the employer becomes liable for what is called the superannuation guarantee charge – this is paid to the ATO, rather than super funds directly. The ATO then pays it through to the relevant superannuation fund. This superannuation guarantee charge is NOT tax deductible, so it is much preferable to pay the superannuation contribution by the due date – in which case it is tax deductible.