When you start a business in Australia raise a lot of questions. What is the GST and do you need to register for GST when starting your own business. These are the questions I will try to answer here:
GST- Goods and Services Tax.
Most of the goods and services produced or offered in business are subjected to this tax.
For example, I decided to start own small business for the production and sale of donuts. In terms of business registration all starts with ABN registration and trade name
For example, I have done it all and began to sell donuts in cafes and restaurants. For sale I have to write out the café and restaurant tax invoice. It specifies the cost of donuts, the date of shipment, terms of payment, etc. There is indicated if GST was included in the price.
As an example total bill is $ 55, 5 of which is a tax that goes to the state. It is 10% of the total sales.
Every 3 months, once a quarter, I shall summarize the tax from all my accounts in the quarter. Also all taxes on purchases are summarized in the quarter. Then first is subtracted from second and that amount is send to the tax office.
The document, which summarizes all the taxes collected by me, is called Business Activity Statement.
The good news is that you need to fill Business Activity statement only if you are registered for GST.
If the amount of my sales is less than 75,000 dollars a year, then I do not have to register. It is not required to pay this tax.
There are some nuances:
Not all products and services are subjected to this tax. Ordinary products – such as flour, bread, milk, sugar, do not include in its value GST. Some services – medical services, kindergarten, also do not include GST.
The second thing is that I have to buy some products for the making of donuts. GST can also be included in price of these products. So I have to sum up all the taxes, which were included in my purchase and deduct them from taxes on the sale.
For example, if I sold 10 thousand donuts in the three months, I have to send $ 909 (10,000 / 11) to tax service.
But I had expenses. Most of my costs – for example, flour or milk, do not include GST. But if I was selling donuts by using a car for transportation, I spend money on gasoline. These costs include GST. How do I know whether it is included or not? Simple, look at the check from the store – there will be separately allocated tax.
So I will summarize all expenses, where GST is included. For example, such costs for the three months – $ 1,200. Tax, included in this amount – $ 109 (1200/11).
So the results of these calculations should be included in the Business Activity Statement -tax collected: 909 Taxes paid: 109 Total tax receivable in my company $ 800 (909-109).
In general, the tax is paid on turnover, regardless if the business brings a profit. And if possible, it is best to avoid the tax.
And how can it be avoided? It’s very simple – do not register for GST. Many small businesses do not have a turnover of more than $ 75,000 a year. They do not need to register for GST.
Of course, if you are doing business in foreign country you may think about bringing your family with you. Here comes another pleasant feature. Australian Family Visa is designed especially for this case and can give a lot of benefits to you and your family.
If business is the provision of such services as a family-run kindergarten, acupuncture, the manufacture or conversion of vehicles for invalids, in these cases, even if the turnover is less than 75,000 a year, it makes sense to register for GST. That’s because every three months, a business will receive gifts from the ATO. Because even though the tax on sales is not paid, the GST on purchases is still returned.
Here are some basic facts about GST. At the end it should be mentioned that Australia is pretty perspective country for opening business and with smart planning, you won`t regret for investing your money in this country.