When Do You Need to Register for GST?
It is important for any business to understand their tax obligations. Find out when you need to register for GST in this guide.
It can be tricky to figure out when you need to register for GST. Nonetheless, it is important for any business to be well aware of their tax obligations and be able to identify this. Therefore, this guide will help you understand when you need to register for GST by explaining a few things. First we’ll explain what GST is. Then, we’ll go through GST mandatory registration requirements and GST voluntary registration possibilities. Finally, we’ll look at taxi and ridesharing services more closely, before summing it all up for you at the end.
What is GST?
Goods and Services Tax (‘GST’) is a tax that is applied to goods and services sold and bought in Australia. Suppliers charge and collect it, and consumers pay for it. You usually charge it as part of the price of the good or service itself. As a supplier, you pay the GST amounts you collect to the ATO when it comes around to do your taxes. The ATO keeps track of who needs to pay GST, and who needs to account for the goods and services GST is charged on, through GST registrations. If you are a supplier of goods or services in Australia, you may need to register for GST if you meet the turnover threshold or offer taxi or ridesharing services. Additionally, you may even register for GST voluntarily. We’re going to go through these three situations in more detail below.
Mandatory GST registration
In a nutshell, you must register for GST if you satisfy two main conditions: you are an entity who is subject to GST obligations, and you meet the GST turnover threshold. If you satisfy these conditions, you have 21 days to register for GST. We’ll go through these conditions here, but note that taxi and ride-sharing services are treated slightly differently (see ‘Taxi and ride-sharing services’ below).
As you might have guessed from our definition of GST, it really only applies to you if you carry on a business or enterprise. There is a fairly complex definition of an ‘enterprise’ in s 9-20 of A New Tax System (Goods and Services Tax) Act 1999 (Cth). Luckily, the ATO breaks it down a bit more clearly on their site. According to them, an enterprise includes businesses, entities engaging in commercial activities, and specific groups like charities and religious organisations.
GST turnover threshold
The GST turnover threshold is the amount of gross income (not profits) you must earn in a year before collecting GST becomes mandatory. This threshold is $75,000 AUD for most businesses/enterprises, and for not-for-profit organisations, the threshold is $150,000 AUD. However, you should note that certain sales and amounts you collect are not included in calculating your gross income. For example, you don’t include the GST amount included in the price of goods and services paid by consumers. You also don’t include sales not connected with Australia or with an enterprise you run. For more assistance in figuring out your GST obligations, we recommend connecting with a tax lawyer.
Voluntary GST registration
Registering for GST is only optional if you are not subject to the above requirements or offering a taxi or ride-sharing service. As long as you have an ABN, you can register for GST at any time. However, you usually have to stay registered for 12 months. There can be some key advantages to registering for GST voluntarily. For one, you can only claim certain tax credits if you are registered for GST. You are also less at risk of missing when you pass the GST turnover threshold if you register early. This is particularly important given you only get 21 days to register on time. Additionally, early GST registration can improve your business image by showing you are serious about your business. This can improve commercial relations with other suppliers/vendors.
Taxi and ride-sharing services
GST registration is mandatory for taxi, limousine, and ride-sharing services regardless of your GST turnover. It’s pretty easy to understand how this would apply to taxi and limousine services. However, ridesharing is not so straightforward. This is because people who offer ridesharing services don’t fit neatly into our definition of GST-paying entities above. For example, ridesharing services are not included in the legislative definition of taxi travel subject to GST registration requirements. Thankfully, the ATO defines ride-sharing services on their site. Essentially, if you make your car publicly available for hire through apps like Uber or GoCatch, and transport passengers for a charge, you offer ride-sharing services and need to register for GST. Therefore, you may not have to register for GST (unless you meet the ‘Mandatory GST registration’ requirements) if you only deliver for UberEats.
In summary, GST is a tax businesses charge on their goods and services. The ATO keeps track of who’s collecting GST through GST registration. You may have to register for GST if you are carrying on an enterprise who meets the GST turnover threshold. Additionally, if you offer taxi, limousine, or ride-sharing services, you have to register for GST regardless of your turnover. Finally, you can register for GST voluntarily to claim certain tax credits and improve your business image.
Beulah is a Legal Tech Intern at Lawpath. He is in his final year at the University of Technology Sydney (UTS). He is interested in disruptive technologies in the legal industry and intellectual property law.