To GST or not to GST? What is the difference?

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First things first – GST is not a cost – if you are registered for GST. By registering for GST it means you must charge GST on all your sales (if they are in Australia) but it also means you can claim back the GST on any purchases you make that have GST in them. If you are not registered for GST you cannot charge GST nor can you claim back GST. This might seem logical but I have come across a lot of people who were not registered for GST but have been charging it and keep it for years.

The law says you don’t need to register for GST until you turnover $75,000 – that is sales not profit! However depending on what sort of business you are in it might be worth considering registering for GST a lot earlier.

Reasons TO register earlier might be –

  • In the early stages of business there is usually a lot of money going out the door and if you are dealing with other GST registered businesses you could reduce your expenses by 10% simply by registering for GST.
  • It looks more professional if you are registered for GST as otherwise you may seem too small for a potential purchaser to deal with.
  • If your competitors are registered for GST it will make it easier for customers to compare pricing if they are comparing apples with apples.
  • If you are in the fresh food industry or health sector or other GST free area so you don’t charge GST but you can claim GST back on things such as rent, petrol which means you are effectively just reducing your costs by 10%

Reasons NOT to register for GST earlier might be –

  • If you deal with mostly end consumers who pay the brunt of the GST so you can be more competitive if you don’t charge GST as you can keep your price down e.g. cleaners
  • If you sell your time and have very little purchases you can be more competitive with your pricing
  • The cost of compliance may outweigh any benefits

If you would like more information about whether or not you should register for GST please feel free to contact us.


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