Registering for GST as a Sole Trader

Wondering if you need to register for GST as a sole trader? If your business revenue is less than $75,000, you are not obligated to register for GST (the exception being if you provide limousine or taxi services, such as Uber).

However, voluntarily registering for GST as a sole trader can have some advantages.

How the GST works

GST is a 10% tax levied on most products and services in Australia. The exceptions include fresh food, education, health, and exports.

If your sole trader business is GST-registered and some or all of the items you sell are subject to GST, you will have to collect this tax from your customers and remit it to the ATO.

At the same time, however, you can get a rebate from the ATO for the amount of GST you have paid to your suppliers.

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When you need to register for sole trader GST

You must register for GST within 21 days of your business revenue reaching the sole trader threshold of $75,000 over any 12-month period. Note that this is the gross revenue your business generates without any expenses deducted.

But even if you could reach the threshold at any point, you should strongly consider registering. Otherwise, you could end up with considerable GST back payments plus penalties, even if you haven’t collected any GST from your customers.

If your business is securely under the threshold, there are advantages and disadvantages to registering for GST on a voluntary basis. In this case, it’s up to you to weigh up whether registering is worth the extra responsibilities and potential costs.

To register, you will first need an ABN (Australian Business Number). If you don’t already have an ABN, you can apply through the Australian Business Register. You can then apply for GST registration through the ATO. This can be done online, by phone, or through a registered BAS agent.

Benefits of voluntarily registering for GST

There are some advantages to registering even if you don’t have to, such as:

• You can claim back any GST you have paid out to your suppliers
• If the value of the GST you have paid exceeds what you’ve collected, you will get a refund
• Registering removes the stress of worrying about whether you might have to register at some point - e.g. if you are getting close to the threshold
• Being registered can boost your business’s image, making it look more professional and established.

Disadvantages of registering if under the threshold

There are also some drawbacks to voluntarily registering:

• Your record keeping becomes more complex as you will need to keep track of all GST collected and paid
• You will have to complete and submit a regular BAS (Business Activity Statement), which creates more work
• If you are unsure how to keep GST records and complete a BAS, you may have to pay a bookkeeper or BAS Agent to do it—an additional cost.

How to calculate sole trader GST on sales

Before calculating the GST on your sales, you first need to find out which of your products and services are subject to GST. Once you have this information, calculate the GST by multiplying the dollar amount you normally charge to customers by 1.1. This becomes the GST-included price from then on.

Example:
A product you charge $15 ex-GST for will become $16.50, including GST (15 x 1.1).

From now on, you will need to charge your customers the GST-included price on Tax Invoices that clearly display your ABN. Your tax invoice should also clearly show the amount of GST included.

Note: you can remove the GST on a price by dividing it by 1.1 (e.g. $16.50 / 1.1 = $15). Also, if you need to find out the GST value of a GST-included price, divide the price by 11 (e.g. $16.50 / 11 = $1.50).

See our dedicated guide to calculating GST and other taxes for rideshare and delivery drivers.

Recordkeeping for GST

Keeping track of GST

if you use one of the popular computer-based bookkeeping programs available to process your invoices and expenses, you will need to set it up for GST. It should then keep track of all the GST you charge and pay and produce a GST report.

If not, other options for recording your transactions include spreadsheets or manual systems, which can be much more work depending on the size of your business.

Submitting the BAS

You must complete a BAS showing the total value of GST collected and paid (plus other information) and submit it to the ATO at regular intervals (monthly, quarterly, or annually). If you owe GST, you will need to pay this amount, but if you are due a refund, the ATO will pay you.

Saving ahead for your GST bill

A good way to reduce GST bill shock is to regularly put aside a certain amount in a separate bank account. That way, you won’t be caught out when the time comes. A BAS agent, accountant, or bookkeeper should be able to help you determine the amount to put aside if necessary.

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