Many micro and small businesses will need to decide if they will register for the GST. As registration starts on 1 November, it is a good idea for businesses to consider the options now.
A business that does not register for the GST does not charge GST on their products or services and is not able to claim an input tax credit for the GST they have paid.
If business costs are high, it may be worth registering for the GST simply to reduce these costs.
The government requires that all businesses with an annual turnover of $50,000 or more ($100,000 for non-profit organisations) register for the GST. For businesses with a turnover below this level, registration is voluntary and will depend on what is best for the business.
This is a current period test and not based on the last financial year.
If a business is on the borderline, turnover will need to be watched closely. As soon as turnover reaches the $50,000 mark or when it is reasonable to expect that the business will reach this level, registration is required.
Business operators registering for the GST will need to decide whether to register on a cash or accruals basis and whether to register to report for GST on a monthly or quarterly basis.
If turnover is below $1 million per annum businesses will be able to register on a cash basis. This means that most small businesses will not need to dramatically change existing accounting systems. A business can also register on an accruals basis if that is easier.
Where turnover is greater than $1 million per annum, a business will ordinarily need to register on an
accruals basis.
As a general rule, most businesses will need to lodge GST returns quarterly. However, any business with a turnover of up to $20 million may elect to lodge monthly.
Business operators need to work through the issues and organise registration in a way most effective to them.
• Paul Drum is senior tax counsel with the Australian Society of CPAs.
