Are you worried about the red tape for your lawn mowing service in Australia? Confused about how to register for GST?
For many people, GST is still an alien concept that they are unable to comprehend. However, when it comes to business owners or entrepreneurs, GST is something you cannot overlook. Because it is charged on almost every product, and without proper knowledge, you can fall into a pool of misinformation with grave consequences.
What is GST?
It stands for Goods and Services Tax. It acts as a tax on the addition of value on a product. Although it is supposed to be paid by the customers, many times, it is included in the sale price of the product, and the businesses collect it for the taxing authority. Currently, you calculate GST at 10% on the price of all goods and services in Australia.
In Australia, if your items are to be exported, you are exempted from paying GST. However, this is based upon two conditions: if the receipt is given to the supplier or an invoice is issued by the supplier within a span of 60 days.
Registering for GST as a mowing company
If your yearly turnover is $75,000 or higher across two years, you must be registered for the GST as per ATO guidelines. Once registered, you can include GST in the sale price of your product or claim compensation. For more detail, Check the ATO website.
Claiming GST credits
GST-registered businesses can claim back GST credits if:
- The purchase is to help run your business (e.g. tools and equipment such as your lawn mowers, stationery such as business cards)
- The purchase price included GST in the first place (so most likely not a second hand mower you purchased from an individual)
- You either already paid for, or will be liable to pay for, the goods or services purchased
- The purchase doesn't relate to input-taxed supplies.
- You have a tax invoice from the seller for purchases more than $82.50
- A customer does not pay for your goods or services that you have paid GST on (of course you have to remind them to pay first).
For further info on claiming GST credits visit the ATO's website.
Important: Make sure you keep your invoices and receipts so you can claim all the GST credits you're entitled to.
Registering for GST?
The registration is quite easy—Register at the Australian Tax Office here. If you do not already have an Australian Business Number (ABN), you must register and apply for that first, you need it to register for the GST.
The ABN is primarily a business code that helps you maintain the identity of your company in a legal spectrum. This will ensure the protection and security of the business while maintaining that you are legally bound to pay the required fees and taxes as per your sales, scale, and size.
Who receives the tax?
This is given to the 'Australian Tax Office' (ATO). Hence, being registered indicates that you are accumulating tax for the ATO on each of your provided services.
How to calculate GST
Various websites will help you calculate GST, such as the ATO's recommended GST calculator on the MoneySmart website. However, the formula is simple:
Your price x 1.1 = GST-inclusive price
The History of GST in Australia
In 2000, then Prime Minister of Australia John Howard introduced the concept of GST into the Australian tax system. He addressed the people where he spoke about the tax reform measures that he would be undertaking, which included the imposition of GST on all goods, services, and items that can be sold to the public. While justifying this step, he assured the citizens that it would help the country move towards a fairer tax system while reducing taxations on income as well as the growing disparities between the finances of people.
He reassured them by citing that the revenue would allow for the improvement of necessities like health, police, education, and other civil amenities and public goods that are required to run a just and strong society.
It is always best to refer to the ATO’s GST page here.