Should your business be registered for GST?
If you’re planning on starting a business or you’ve already started one, you may be wondering if you should be registered for GST.
Many business owners think it’s a requirement to be registered for GST.
This is not quite true – if your turnover is likely to be or exceed $75,000 per year, then yes, your business needs to be registered for GST.
However, if it’s less than $75,000 per year, then registering for GST is optional.
If your business has not reached the required level of turnover ($75,000), you still need to think about the ramifications of both registering and opting not to do so.
What are the benefits of being GST registered?
From an accounting perspective, we believe more often than not, it’s still a good idea to be GST registered, even if your business has not yet reached an annual turnover of $75,000.
Well first of all, the simple act of having to prepare a quarterly activity statement is an invaluable exercise in itself.
You will need to collate all your revenue for the quarter and line it up against all your business expenses.
Very few business owners check to see how they are tracking against their business plan.
By having to run through revenues for the quarter, you can gauge how you’re likely to track for the remainder of the year.
On the other side, preparing an activity statements requires you to disclose all your business expenses for the quarter – another invaluable exercise.
It’s very easy to over spend in business – materials, outsource labour, equipment, stationary etc. By noting what you’re spending on will help to rein in overspending and possibly even encourage you to look for lower priced options.
Secondly, any expenses you occur will most likely include GST. Being GST registered allows you to claim GST credits (on those expenses) from ATO in your quarterly activity statements.
Finally, if your turnover does indeed reach the $75,000 threshold and you are not GST registered, you then run the risk of upsetting your clients by all of a sudden having increase your prices by 10%. Being registered from the outset eliminates this risk.
What’s the downside of being GST registered?
The single one draw-back of being GST registered are the compliance requirements and associated cost i.e. accountants fees & charges.
Every quarter, you will be required to identify and disclose all your business revenue for the quarter as well as any business-related expenses – this means keeping all those receipts!
While this is a requirement, the ‘paperwork’ burden can certainly be lessened through the use of cloud-based accounting systems.
Additionally, you can involve your accountant [link to accountant blog] in preparing the activity statements – and in doing so, he or she can help keep a finger on the pulse of your business – highlighting any issues or concerns before they become significant to the business.
How to register for GST
Registering your business for GST is a relatively straight forward process.
There are very good online resources to help with the process.
Or alternatively, speak with your accountant to ensure registration is properly implemented and that any critical steps or pieces of information have not been missed.
To find out more about GST and for a no obligation consultation, call Aperture Accounting on 1300 273 788