What is GST Turnover
Put simply, GST turnover is the likely gross income of your business for a 12 year period. GST turnover is based on the gross (before tax) income of your business, excluding any:
- GST included in sales to your customers
- Sales that are not for payment and not taxable
- Sales not connected with an enterprise you run
- Input-taxed sales you make such as sales of Financial Supplies like Shares or rent from residential accommodation
- Export of goods or services – and any sales not connected with Australia.
When should you register for GST?
A business must register for GST in any of the following circumstances:
- Your business or enterprise turns over $75,000 or more (or $150,000 if it’s a not‑for‑profit organisation)
- If you provide taxi or limousine travel for passengers in exchange for a fare (including ride‑sourcing, such as Uber, Ola or DiDi)
- Or, you want to claim fuel tax credits for your business or enterprise.
You can also register for GST if your GST turnover is under the threshold. For example, if you have plans to purchase a large asset that attracts GST for your business. If you do this however you must then start to pay GST on your income even if the amount is below $75,000 per year. By completing GST registration your business will need to complete a business activity statement every quarter, or monthly.
How do you calculate your GST turnover ?
Calculating your GST turnover involves taking your revenue from a single month of operation, and then using that figure as projected gross business income. That means there’s two elements to it: current GST turnover, and projected GST turnover. It’s important to first remember what the threshold is to determine whether or not your revenue will see your GST turnover cross the threshold into the requirement to register for GST. Remember the threshold is:
- $75,000 or more for businesses and enterprises
- $150,000 or more for not‑for‑profit organisations.
To work out whether you reach the GST turnover threshold, you need to calculate both your:
- current GST turnover, and
- projected GST turnover.
If your current GST turnover reaches the threshold but your projected GST turnover doesn’t, you don’t need to register (unless you provide taxi travel or want to claim fuel tax credits).
Calculating current GST turnover
Your current GST turnover is the gross income of your business for the current month and the previous 11 months.
As always, understanding the complexities of business tax is easiest via a case study, so let’s look at an example:
Barry is a sole trader who sells specialised car parts. At the end of June this year, his gross business income for the month is $2,560. Barry must work out if this amount plus the previous 11 months’ gross business income reaches the threshold of $75,000.
Barry adds his gross business income for June and the previous 11 months together. His current GST turnover is $31,170. Although this is less than $75,000, he must now calculate his projected GST turnover. He will need to register for GST if this is $75,000 or more. Barry continues to calculate his
Calculating projected GST turnover
Your projected GST turnover is the likely gross income of your business for the current month and the next 11 months. You can determine this by taking the current month’s income, and multiplying it by 12 for each month of the year.
Here’s another example to make it a little bit easier to understand:
Leanne and Jenette own and operate a business selling art and are in a partnership business structure. At the end of June this year, their gross business income for the month is $7,560. Leanne and Jenette need to work out if the business must register for GST. To do this, they need to project what the business’s gross income will be for the next 11 months.
As Leanne and Jenette’s projected gross business income is the same each month, they need to multiply the business’s gross income for June by 12 to see if it has reached the GST threshold of $75,000. They calculate their projected GST turnover as follows: $7,560 × 12 = $90,720. As this is over the turnover threshold of $75,000. They have 21 days to register the business for GST.
How do you register for GST
So, you’ve done the sums and determined that your business is bringing in income of over $75,000 in a 12 month period (or, $150,000 if it’s a non-profit!) That means you need to register for GST, and be charging GST on all of your sales.
First things first – before you register for GST, you must have an Australian business number (ABN). To register for an ABN, visit abr.gov.au.
You can apply for a business name and register for GST (and other taxes and PAYG withholding if necessary) at the same time.
If you already have an ABN, you can register for GST in the following ways:
- via the Australian Taxation Office Business Portal
- by phone on 13 28 66
- through your registered tax or BAS agent.
Get professional advice!
Let’s face it – starting a small business can be a daunting process. There’s a lot that you need to learn and understand in a very short period of time, and understanding your tax obligations – particularly when it comes to GST – can be something that can see a small business sink or swim.
At Bishop Collins, we understand that every business is unique and different, and as a business owner your focus is on building that business to the point of viability. That’s why our accountants offer expert tax and GST services that provide you with everything you need to ensure your business is ticking all the right boxes, and help you claim GST credits and any business GST concessions you may be owed.
So if you’re looking for a trusted professional to assist with your business tax obligation, getn in touch with the team at Bishop Collins!