One of the questions that the new business owner needs to address in their startup Business Plan is whether or not to register for GST. This is just one of the decisions you will have to make when starting up your home based small business.
This question should not be confused with whether or not to apply for an ABN (Australian Business Number). Although you can operate your business without an ABN, there are some consequences for not registering.
Step 1 – Apply for an Australian Business number whether or not you are going to register for GST. The application process can be completed online at the Australian Business Register Website. This site will also give you information as to what the consequences are for not registering for an ABN.
Step 2 – Decide if you are going to register for GST.
- The first criteria that you need to take into consideration when deciding whether to register for GST is whether your Annual Business turnover will be over $75,000. If this is the case it is compulsory for you to register for GST. You will need to register for and AUSKey and can then register for GST online at the Australian Business Register website.
- If you decide not to register as your predicted income is below the $75,000 threshold, you will still need to monitor your business income and register as soon as you believe that your income is likely to go over the threshold.
- If you register for GST you will need to forward any GST collected on your business income to the ATO, but you can claim back any GST paid on business purchases. It is the Net amount of GST (GST Collected – GST Paid) that you forward to the ATO when you lodge your BAS. It may be worth registering for GST at the start up point of your business so you can claim back the GST on your Business setup costs.
- Many Micro Business owners are discouraged from registering for GST due to the compliance issues involve. They may be concerned by the fact that they have to keep their business records up to date so that they can lodge the quarterly BAS. I actually look at this as a positive! If your bookkeeping is up to date you can monitor your business’ progress and ensure that your new business is growing.
- It is also worth considering how your business partners will view your business if you are not registered for GST. If you are not registered for GST you are advertising the fact that your business is a small fish in a big pond, all your business partners will know that your turnover is below $75,000 per annum.
Personally, I believe it is a good idea to register for GST when starting your new Micro Business. When I started my business BOOST Bookkeeping in Oct 2006, I immediately registered for GST. I think it shows a positive attitude and a commitment to growing your business above the $75,000 income threshold.