GST registration in Australia: the $75,000 threshold and how to register

Do you need to register for GST?

You need to register for GST if your GST turnover is $75,000 or more, or is likely to reach it. Below that, registration is optional. According to the ATO's registering for GST page, registration is compulsory in these situations:

• Your business or enterprise has a GST turnover of $75,000 or more (gross income from all your businesses, minus GST).
• You are starting a new business and expect turnover to reach $75,000 in your first year.
• Your non-profit organisation has a GST turnover of $150,000 a year or more.
• You provide taxi or limousine travel for passengers, including ride-sourcing, regardless of turnover. This applies to owner-drivers and to drivers who lease or rent a vehicle.
• You earn income through the sharing economy or digital platforms, such as food delivery or other platform-based work (check the ATO sharing economy guidance for your platform).
• You want to claim fuel tax credits for your business.

How the GST threshold is measured: current and projected turnover

The GST threshold is tested two ways every month, and crossing either one triggers the 21-day deadline. Current GST turnover is the total for the current month plus the previous 11 months. Projected GST turnover is the current month plus the next 11 months. GST turnover is income, not profit: total business income minus the GST in your sales, input-taxed sales, sales to associates that are not for payment, sales not connected with your enterprise, and sales not connected with Australia.

For the projection, leave out the sale of capital assets (such as selling a work vehicle) and sales made only because you are closing or permanently downsizing the business. The ATO also says you don't have to register if your current turnover is over the threshold but it is satisfied your projected turnover will be under it, for example after a one-off large job.

Worked example: Mia is a freelance designer billing about $5,500 a month. Her current GST turnover is $66,000, under the threshold. In March she signs a retainer worth an extra $2,000 a month from April. Her projected turnover for March plus the next 11 months is now about $88,000, so she reaches the $75,000 threshold in March and must register within 21 days, even though she has not yet earned that much.

How to register for GST, step by step

You can only register for GST once you have an ABN. After you register, the ATO notifies you in writing of your GST registration details, including the date your registration takes effect.

• Get an ABN through the Australian Business Register if you don’t have one. You can register for GST in the same application or later.
• Register for GST through Online services for business, by phoning the ATO business enquiries line (13 28 66), or through a registered tax or BAS agent. You only register once, even if you run several businesses.
• Choose your GST accounting method. Businesses with aggregated turnover under $10 million can account on a cash basis (GST counted when money changes hands) or a non-cash (accruals) basis (GST on a sale is counted when you issue the tax invoice or receive any payment, whichever happens first).
• Choose your reporting cycle (quarterly unless you are required or choose to report monthly; annual only if you registered voluntarily below the threshold).
• Update your prices, invoice templates and accounting software so GST is charged from the effective date of registration.
• If you should have registered earlier, ask the ATO to backdate your registration by phone. Backdating is limited to 4 years unless there is fraud or evasion.

What changes once you are registered

Once registered, you include 10% GST in the price of most sales, pay that GST to the ATO, and claim back the GST in your business purchases as GST credits. A $1,100 GST-inclusive sale contains $100 of GST (one-eleventh of the price) and $1,000 of income for you.

If a customer asks for a tax invoice you must provide one within 28 days, unless the sale is $82.50 or less including GST. For sales under $1,000 the invoice must show that it is intended to be a tax invoice, your identity and ABN, the date, a description, quantity and price of what was sold, the GST amount (or "Total price includes GST" if it is exactly one-eleventh) and the extent to which each sale is taxable. From $1,000 it must also show the buyer's identity or ABN. PDFs and eInvoices sent through the Peppol network can be valid tax invoices.

To claim a GST credit on a purchase costing more than $82.50 including GST you need a tax invoice from the supplier, and the ATO says to wait until you receive it before claiming. You generally have 4 years to claim a credit, so a missed credit can be picked up on a later BAS.

BAS cycles and due dates after you register for GST

Most small businesses report GST quarterly. You must report monthly if your GST turnover is $20 million or more, and you may elect annual reporting only if you registered voluntarily and your GST turnover is under $75,000 ($150,000 for not-for-profit bodies).

Lodging online can give you an extra 2 weeks for quarterly BAS, and registered tax or BAS agents may have later dates. There is no extension for the October to December quarter because 28 February already includes one. If a due date falls on a weekend or public holiday, you have until the next business day.

Worked example: your first quarterly BAS

Under the default Simpler BAS method (GST turnover under $10 million) you report only three GST labels: G1 total sales, 1A GST on sales and 1B GST on purchases. Suppose a plumber's GST-inclusive sales for the quarter are $33,000 and GST-inclusive business purchases are $8,800.

• G1 total sales: $33,000 (reported including GST).
• 1A GST on sales: $3,000 (one-eleventh of $33,000).
• 1B GST on purchases: $800 (one-eleventh of $8,800, supported by tax invoices).
• Net GST payable: $2,200, due 28 October for a July to September quarter.

Should you register for GST voluntarily?

Voluntary registration usually suits businesses that sell mainly to other GST-registered businesses, because those customers claim the GST back and your price is effectively unchanged, while you recover GST on your own set-up costs. It suits businesses selling to consumers less well: either your prices rise by 10% or your margin shrinks by one-eleventh.

If you register voluntarily you generally must stay registered for at least 12 months, and you take on BAS lodgement and record-keeping. If your GST turnover is under the threshold you can choose annual GST reporting to keep the paperwork down.

Common GST registration mistakes

These are the errors that most often lead to back-dated GST bills:

• Testing profit instead of turnover. A business with thin margins can owe GST registration long before it makes a large profit.
• Ignoring projected turnover. A big new contract can push you over the threshold on the day it is signed.
• Registering late. If you should have been registered, the ATO can require GST on sales made since that date even if you did not add it to your prices, so it effectively comes out of the price you already received, plus penalties and interest.
• Forgetting that ride-sourcing drivers must be registered for GST whatever they earn, and can’t cancel just because turnover is low.

Cancelling your GST registration

You must cancel within 21 days of selling or closing your business or changing its structure (for example from a partnership to a company). You may cancel if your GST turnover falls below the threshold, unless you are a taxi or ride-sourcing driver. Cancel through Online services for business, your agent, by phone or with the Application to cancel registration (NAT 2955). If you are closing the business you must also cancel your ABN within 28 days.