GST

GST registration is required in the following circumstances:

• You must register for GST when your business or enterprise reaches or exceeds a GST turnover of $75,000 or more. The GST turnover refers to the gross income from all businesses minus the GST.
• If you are starting a new business and anticipate that your turnover will reach the GST threshold (or more) within the first year of operation, you must register for GST.
• If you are already in business and your turnover has reached the GST threshold of $75,000 or more, you must register for GST.
• GST registration is mandatory for non-profit organizations if the annual GST turnover amounts to $150,000 or more.
• Regardless of your GST turnover, you must register for GST if you provide taxi or limousine travel services (including ride-sourcing), both as an owner-driver or through leasing or renting a taxi. 
• If you wish to claim fuel tax credits for your business or enterprise, you must register for GST.

Registration for GST is optional for businesses or enterprises that do not fall under any of the above categories. However, if you choose to register, you generally must remain registered for at least 12 months.

If you are not registered for GST, it is important to monitor your monthly turnover to determine whether you have reached or are likely to exceed the threshold. If your GST turnover surpasses the relevant threshold, you must register within 21 days.

Calculating GST turnover

Your GST turnover is your total business income less:

• GST included in sales to your customers
• sales to associates that aren’t for payment and aren’t taxable
• sales not connected with an enterprise you run
• input-taxed sales you make
• sales not connected with Australia.

GST turnover threshold
You reach the GST turnover threshold if either:

your current GST turnover – (your turnover for the current month and the previous 11 months – totals $75,000 or more ($150,000 or more for non profit organisations)
your projected GST turnover – your total turnover for the current month and the next 11 months – is likely to be $75,000 or more ($150,000 or more for non profit organisations).
Using a business software package to account for sales and expenses may make this easier.

When working out your projected GST turnover don’t include:

• amounts you receive for the sale of a business asset such as the sale of a capital asset
• any sale you make, or are likely to make, solely as a consequence of ceasing to carry on an enterprise, or substantially and permanently reducing the size or scale of an enterprise.

Even if your current GST turnover is at or above the GST turnover threshold, you don’t have to register for GST if your projected GST turnover will be less than the threshold.

Non Resident GST registration

The registration requirements for GST are quite similar for Non Resident entities and residents regarding the GST turnover threshold. The GST turnover for Non Residents includes the total value of imported services, digital products sold to Australian consumers, and low-value imported goods sold to consumers.

International businesses that have sales connected to Australia over a certain threshold may need to register and pay GST in Australia. This applies to electronic distribution platform (EDP) operators that allow merchants to make sales of services, digital products or low value goods to Australian customers; merchants who sell services, digital products, and/or low value goods to consumers in Australia; and redeliverers that bring low value goods to Australia on behalf of a consumer.

Under GST, low value goods are generally goods with a customs value (ie price the goods are sold for, minus freight and insurance from place of export) of $1,000 or less. It should be noted GST will not apply to some sales such as basic/essential food and beverage items, certain medical services/medical aids and appliances, certain education courses and materials, as well as certain cars and car parts for eligible people.

If you’re a relevant merchant, EDP, or redeliverer, and the value of sales connected to Australia over a 12-month period is equal to or more than AUD$75,000, you will be required to register for GST. The business will also be required to charge GST by including it in the price when selling the product or services to consumers in Australia. The GST collected from the sales will need to be reported to the ATO through the lodgment of a GST return of a business activity statement (BAS), and the amount of GST collected will need to be remitted to the ATO in Australian dollars.

For most merchants, EDPs and redeliverers, simplified GST registration will be the easiest way to meet their GST obligations in Australia. This can be used where an ABN is not needed by the non-resident businesses, and it also does not need to claim GST credits (including credits for taxable importations). Additional requirements include making sales of low value goods or imported services and digital products.

Once registered, non-resident businesses will receive secure access to ATO online services for non-residents which will allow registration, lodgment and payment of GST obligations. Once registration is completed, a unique 12-digit identifier, an Australian Reference Number (ARN), will be sent to the relevant non-resident business to use as an identifier for the ATO system and on invoices and customs documentation if required.

Under simplified registration, non-resident businesses must lodge GST returns and pay GST on a quarterly basis. According to the ATO, when paying a GST liability, non-resident businesses must pay the full GST amount owing and any card payment fees, bank handling and exchange fees using either SWIFT or a credit/debit card.

Non-resident businesses that don’t qualify for the simplified registration may have to apply for standard registration where registration thresholds are reached. It also applies where a non-resident business wants to issue tax invoices or want to claim GST credits which can’t be done under the simplified GST registration. However, the drawback with standard registration is that non-resident businesses will not be able to lodge electronically from outside of Australia and may need to engage an Australian registered tax agent. Additional ABN and proof of identity requirements also apply.

How to register for GST

Once you have an ABN, you can register for GST:

• via ATO Online services for business or by phoning the ATO on 13 28 66
• through a registered tax agent or registered BAS agent

Claiming input tax credits

You can claim credits for the Goods and Services Tax (GST) included in the prices of goods and services you purchase for your business. This GST credit, also known as an input tax credit, allows you to reduce your GST liability.

To make these claims on a Business Activity Statement (BAS), it is essential for your business to first be registered for GST.

Business Use Intent
Ensure that your purchases are intended for use, either wholly or partially, in your business operations. Note that purchases related to GST exempt supplies are not eligible for GST credits.

GST Inclusive Purchase Price
Make sure that the purchase price includes the GST amount. You can claim GST credits only on the GST component of the purchase price.

Calculating the Input Tax Credits on an invoice
When a tax invoice only mentions that the price includes GST without specifying the amount, you can calculate the GST credit. Divide the price by 11, and this result represents the GST credit you can claim, provided the item is used wholly for business purposes.

For purchases used for both business and private purposes, you can claim a GST credit only for the portion used for business. For instance, if 50% of the usage is for business purposes, you should claim a GST credit for 50% of the GST paid.

Cash Basis Accounting and Partial Payments
If you employ the cash basis accounting method and have not yet made full payment for a purchase, you are eligible to claim a GST credit solely for the portion of GST included in the amount you have already paid. This applies until the full payment is made. 

Once you have calculated your total GST credits, you can use them to offset the amount of GST you are required to pay. If your GST credits exceed your GST liability, you are entitled to a refund of the difference.

Time limits for claiming Input Tax Credits
Your entitlement to claim a GST credit expires four years from the due date of the earliest activity statement in which you could have claimed it, irrespective of any tax invoice requirements. Within this four year period, you can claim the credit in any BAS that you lodge.

Apportioning input tax credits for business and private use

When you purchase goods or services that are used for both business and private purposes, the following considerations apply:

Apportionment of Input Tax Credits
You can only claim a GST credit for the part of the purchase that is used for your business operations. It is necessary to calculate and claim credits only for the business-related portion of the purchase, excluding the private use component.

Adjustments for Actual Use
If you later find that your actual use of the purchased items differs from your initial intended use, adjustments to the claimed GST credits may be required. It is crucial to ensure that the claimed credits accurately reflect the business-related portion of the purchase.

Annual Private Apportionment Election for Small Businesses
Small businesses have the option to simplify the process of accounting for the private portion of their business purchases. Instead of making adjustments each time they lodge an activity statement, they can choose to make an annual private apportionment election. By doing so, they can account for the private use aspect of their business purchases once a year.

Tax invoice requirements for claiming input tax credits

For purchases that cost more than A$82.50 (including GST), you must have a tax invoice. When you request one, your supplier has 28 days to provide it to you.

Remember to wait until you receive the tax invoice before claiming the GST credit, even if it falls in a later reporting period.

Obtaining a Complete Tax Invoice
To ensure a tax invoice is valid, it must contain accurate and complete information. If you receive an invoice that is incomplete or contains incorrect details, it won’t qualify as a valid tax invoice.

However, you can still treat it as one if you can get the missing information from other documents the supplier has given you. In case you can’t obtain the necessary details, ask your supplier to provide a complete and correct tax invoice.

Missing Tax Invoice from Supplier
If your supplier doesn’t respond to your request for a valid tax invoice within the 28-day period, and you can’t find the missing information from other supplier-issued documents, you have the option to seek permission to treat a different document as a valid tax invoice.

Input Tax Credits for Small Purchases
For purchases that cost A$82.50 or less (including GST), you have several options for claiming GST credits. You can use any of the following documents:

• Tax invoice
• Cash register docket
• Receipt
• Invoice

If you can’t obtain any of these documents, keep a record of the purchase. Record the supplier’s name and Australian Business Number (ABN), date of purchase, a description of the items purchased, and the amount paid.

Situations where input tax credits cannot be claimed

Not Registered for GST: If your business is not registered for GST, you cannot claim input tax credits on your purchases. Registering for GST is a prerequisite for claiming these credits.

Purchases without GST: You cannot claim an input tax credit for purchases that do not include GST in their price. This includes purchases where the sale is GST free, such as basic foods, and purchases where the sale is input taxed, such as residential accommodation, bank fees, and loan interest.

Purchases from Unregistered Suppliers: Input tax credits cannot be claimed for purchases from suppliers who are not registered or not required to be registered for GST. Unregistered suppliers cannot charge GST on their sales.

Wages Paid to Staff: Input tax credits cannot be claimed on wages paid to staff. Wages are exempt from GST, so no credits can be applied to these expenses.

Absence of a Valid Tax Invoice: For purchases exceeding A$82.50 (including GST), you must have a valid tax invoice to claim a input tax credit when lodging your activity statement. Without a tax invoice, you cannot claim input tax credits for these purchases. However, there are specific circumstances where input tax credits may be claimed without a tax invoice.

Other purchases for which you cannot claim input tax credits, even if the GST is included in the purchase price, include:

• You cannot claim input tax credits for purchases made for private or domestic purposes. input tax credits are only applicable to purchases used for business related activities.
• Purchases associated with making input-taxed supplies, such as those linked to providing residential accommodation, are not eligible for input tax credits.
• For real property purchased under the margin scheme, you cannot claim input tax credits.
• input tax credits cannot be claimed on certain expenses that are not allowable as income tax deductions. Examples include entertainment expenses, which are subject to specific tax regulations.
• If the purchase of a car results in the cost exceeding the car limit amount specified for the relevant financial year, you cannot claim input tax credits on the excess amount.
• Input tax credits cannot be claimed if the time limit for claiming them has expired. Ensure timely submission of input tax credit claims to avoid missing out on eligible credits.

Special rules for specific input tax credit claims

Company Pre establishment Costs

When setting up a company, the company is eligible to claim input tax credits for the GST included in certain purchases made before the company’s official establishment. These pre establishment costs may include expenses like setup fees, trading stock, business premises and business registration. In order to claim GST credits for pre establishment costs, it is necessary to meet the following criteria:

Purchase Purpose: The purchase must be made to bring the company into existence or to support its business activities after its formation.

Timely Company Registration: The company must come into existence and be registered for GST within six months after the purchase.

Membership, Officer, or Employee Status: You must become a member, officer, or employee of the company.

Full Reimbursement: The company must fully reimburse you for the cost of the purchase.

Non Input Taxed Sales or Private Use: The purchase must not be used for making input-taxed sales or for private purposes.

No Double GST Credit Claim: The company should not be entitled to claim an input tax credit for the purchase if it subsequently acquires the same item from you.

No Double GST Credit Claim for You: You should not be entitled to claim an input tax credit for the same purchase.

Second hand goods

When purchasing second hand goods from unregistered suppliers for the purposes of sale or exchange (excluding manufacture), you can claim an input tax credit, even if GST was not included in the price.

However, specific conditions must be met to be eligible for this credit. These include:

• The goods must be bought with the intention of reselling or exchanging them.
• The purchase should be made from an unregistered supplier, meaning they are not registered for GST.
• The second-hand goods must not be intended for use in the process of manufacture.

Other special rules

It is advisable to consult with an appropriately qualifed adviser if you have any questions regarding these situations:

• Periodic or Progressive Supplies
• Purchases with Corporate Credit Cards
• Land Purchases under Standard Land Contracts
• Supplies of Gas and Electricity
• Lay by Purchases

What is a taxable supply?

If you are registered for GST or required to be, the goods and services you sell in Australia are taxable, unless they are GST free or input taxed.

To be a taxable supply, a sale must be:

• for payment of some kind
• made in the course of operating your business
• connected with Australia

You pay GST on the taxable supplies you make when you lodge your activity statement. For these taxable supplies, you:

• include GST in the price
• issue a tax invoice to the buyer
• pay the GST you’ve collected when you lodge your activity statement.

You can claim credits for the GST included in the price of purchases you needed to make your taxable supplies.

If your sale can be separated into identifiable parts and any of those parts are GST free or input taxed, the sale is partly taxable. You only need to pay GST on the taxable part of the sale.

For a sale to be taxable, it must be made for payment which can be monetary or another form of payment, such as:

• goods or services provided instead of money, such as barter transactions
• payment in the form of refraining from doing something.

For a sale to be taxable, you must provide the goods or services as part of conducting your business. This includes all sales of business assets, including items such as motor vehicles and office plant and equipment. It also includes things done in the course of setting up or winding down your business.

Sales connected with Australia

GST applies to sales connected with Australia, whether they are:

• goods
• property
• things other than goods or property.

Goods

A sale of goods is connected with Australia if the goods are either:

• delivered or made available in Australia to the purchaser
• removed from Australia
• brought to Australia – provided the seller either imports the goods or installs or assembles the goods in Australia.
• from 1 July 2018, supplies of low value imported goods to a consumer in Australia.

Exports of goods and services from Australia are generally GST free, even though the sale is connected with Australia.

Property

A sale of property is connected with Australia if the property is in Australia.

For GST purposes, property includes:

• land
• land and buildings
• interest in land
• rights over land
• a licence to occupy land.

Things other than goods or property

A sale of something other than goods or property is connected with Australia if either the:

• thing is done in Australia
• seller makes the sale through a business they carry on in Australia
• sale is of a right or option to purchase something that would be connected with Australia.
• purchaser of the sale is an Australian consumer.

GST free products and services

Most basic foods, some education courses and some medical, health and care products and services are GST free, often referred to as exempt from GST. Things that are GST free include:

• most basic food (see our GST on Food article for more detail)
• some education courses, course materials and related excursions or field trips
• some medical, health and care services (see our GST and Health Services article for more detail)
• some menstrual products
• some medical aids and appliances
• some medicines
• some childcare services
• some religious services and charitable activities
• supplies of accommodation and meals to residents of retirement villages by certain operators
• cars for disabled people to use, when certain requirements are met
• water, sewerage and drainage
• international transport and related matters
• precious metals
• sales through duty-free shops
• grants of land by government
• farmland
• international mail
• exports
• sales of businesses as going concerns
• some telecommunications supplies
• eligible emissions units.

GST Free exports of goods

Exported goods are GST free if they are exported from Australia within 60 days of one of the following, whichever occurs first:

• the supplier receives any payment for the goods
• the supplier issues an invoice for the goods.

In the case of goods paid for by instalments, the payment or invoice must be for the final instalment.

Suppliers can apply to us to extend the 60-day period.

Other GST Free exports

Other exports generally include supplies of things other than goods for consumption outside Australia, such as:

• services
• various rights
• other professional services.

A supply of a service is usually GST free if the recipient of the service is outside Australia.

There are specific rules that determine if the supply is GST free.

See also

• GSTR 2019/1 Goods and services tax: supply of anything other than goods or real property connected with the indirect tax zone (Australia)
• GSTR 2018/2 Goods and services tax: supplies of goods connected with the indirect tax zone (Australia)
• GSTR 2002/6 Exports of goods
• GST definitions

GST Free sale of a business as a going concern

The sale of a business as a going concern is GST free if all the following apply:

• before the sale, the buyer and seller agree in writing that the sale is of a going concern
• the buyer is registered or required to be registered for GST
• everything necessary for the business to continue operation is supplied to the buyer
• the seller carries on the business until the day it is sold (date of settlement)
• payment is made for the sale.

Input taxed sales are sales of goods and services that don’t include GST in the price. You can’t claim GST credits for the GST included in the price of your inputs. The most common input taxed sales are financial supplies and selling or renting out residential premises.

What are financial supplies?

Financial supplies include a range of specific activities listed in the GST regulations. Examples of these activities include:

• Providing lending or borrowing services, such as offering loans or credit facilities
• Offering goods on credit to your customers and charge a fee for this service
• Activities related to creating, maintaining, or closing your customers’ bank accounts
• Providing life insurance policies or related financial products
• Engaging in trading or dealing of debt, equity, unit trusts, partnership interests, or futures contracts

You can make financial supplies even if you are not a financial institution.

For example, even though you operate a department store and are not classified as a financial institution, you have the capability to provide your customers with credit and charge interest on that credit.

These transactions are considered input taxed financial supplies. In other words, even though you are not a specialised financial entity, you can still offer financial services like extending credit facilities, and these services are subject to specific tax treatment known as input taxed supplies.

There are four important exceptions that allow businesses to claim GST credits for certain purchases used in making financial supplies.

Exception 1: Conducting business outside Australia

If your business carries out financial supplies through a business operation or a part of a business located outside Australia, you can claim the GST credit on purchases used for these international financial supplies.

Exception 2: financial acquisitions threshold

The financial acquisitions threshold plays a vital role in determining a business’s eligibility to claim GST credits on its financial acquisitions made within a 12-month period.

Two tests are these to evaluate this threshold, and either test can lead to exceeding the limit. Both tests focus on financial acquisitions related to making financial supplies, excluding borrowings.

The evaluation includes all financial acquisitions made over the past 12 months, including both current acquisitions and estimated future acquisitions.

Test 1: Current Financial Acquisitions
To assess whether a business surpasses the financial acquisitions threshold, this test takes into account the financial acquisitions made during the current month and the preceding 11 months.

These acquisitions should not be utilized for input-taxed sales or used partly for private or domestic purposes.

Test 2: Future Financial Acquisitions
The second test examines a business’s financial acquisitions for the current month and the subsequent 11 months.

Future financial acquisitions must be estimated. Similar to the first test, these acquisitions should not be used for input-taxed sales or utilized partly for private or domestic purposes.

Threshold Exceedance Criteria:
To determine if a business exceeds the financial acquisitions threshold in a given month, it must compare the GST credits eligible for both current and future financial acquisitions with the the threshold amount of $150,000 in the relevant 12 month period.

The business must calculate the GST credits it could claim for all purchases, including financial acquisitions, during the relevant 12-month period. If the amount of GST credits for current or future financial acquisitions exceeds 10% of the total GST credits from all purchases, the business has surpassed the threshold.

Exception 3: purchases related to borrowing

Businesses can actively claim GST credits on purchases directly linked to making a financial supply that involves borrowing, as long as the borrowing is associated with supplies not considered input taxed.

This allows businesses to recover a portion of the GST paid on relevant expenses incurred during borrowing activities.

Concession Limitations for Australian Authorised Deposit Taking Institutions (ADIs):
As of 1st July 2012, a concession that previously allowed Australian authorised deposit-taking institutions (ADIs), such as banks, building societies, and credit unions, to claim GST credits on borrowing-related purchases is no longer applicable under specific circumstances.

Specifically, the concession does not apply if the ADI makes a financial supply consisting of a borrowing through a deposit account. In such cases, these ADIs are ineligible to claim GST credits on purchases associated with that particular borrowing.

Perspective from the Lender
From the lender’s standpoint, purchases related to the loans they provide are considered financial acquisitions. As financial acquisitions, these purchases are eligible for claiming GST credits, subject to any applicable GST rules and regulations.

Exception 4: reduced credit acquisitions

Reduced credit acquisitions represent specific types of purchases listed in the GST regulations, allowing businesses to claim a partial GST credit when using these items to make financial supplies and exceeding the financial acquisitions threshold.

Under this arrangement, businesses can generally claim 75% of the GST included in the purchase price of reduced credit acquisitions.

Categories of Reduced Credit Acquisitions
Reduced credit acquisitions include various categories, each aligned with distinct financial services, enabling businesses to claim a partial GST credit for eligible items used in financial supplies. The list is as follows:

• financial services related to managing accounts and processing transactions, facilitating efficient cash flow and banking operations.
• payment processing and secure fund transfers, ensuring smooth financial transactions.
• services related to securities transactions and unit registry, ensuring accurate record-keeping and management.
• financial services related to borrowing and lending, facilitating the smooth flow of funds through loan arrangements.
• financial services provided by credit unions, offering specialized financial products and services to their members.
• debt collection services aim to recover outstanding debts on behalf of businesses.
• financial services that utilize assets as collateral for obtaining funds, enabling efficient asset-based financing.
• trade finance services that support businesses engaged in international trade.
• purchases linked to capital markets and financial instruments services, including derivatives.
• reduced credit acquisitions related to funds management services.
• insurance services, including brokerage, qualify as reduced credit acquisitions.
• trustee and custodial services that ensure the secure holding and management of assets and investments on behalf of beneficiaries.
• supplies made to recognised trust schemes, providing essential financial services within a regulated framework.
• monitoring services that involve the supervision and oversight of financial activities to ensure compliance and optimal performance.

A tax invoice is a document that outlines the details of a taxable sale and includes specific information depending on the sale amount, sale type, and the issuer of the invoice.

If a customer requests a tax invoice, it is the responsibility of the seller to provide one within 28 days of the request. However, there is an exception for sales amounting to $82.50 or less (including GST), where a tax invoice is not mandatory.

Tax invoices for sales under $1,000

For taxable sales below $1,000, a tax invoice must contain the following seven key details to be considered valid:

• Document Intent: The invoice should be clearly labeled as a tax invoice, distinguishing it from other types of invoices.
• Seller’s Identity: The tax invoice must state the seller’s name and business identity, allowing the customer to identify the supplier.
• Seller’s Australian Business Number (ABN): The seller’s ABN should be included on the tax invoice, ensuring accurate identification of the business for tax purposes.
• Invoice Issuance Date: The date on which the tax invoice was issued must be clearly specified.
• Description of Items Sold: The tax invoice should provide a brief description of the items or services sold, along with the quantity (if applicable) and the corresponding price.
• GST Amount: If the sale attracts Goods and Services Tax (GST), the invoice must show the GST amount payable. It can be displayed separately or indicated as part of the total price, provided that the GST amount is exactly one-eleventh of the total.
• Taxable Sale Details: The tax invoice should indicate the extent to which each sale on the document is considered a taxable sale, differentiating it from non-taxable items.

Consideration for Different Sales Types
The information required in the tax invoice may vary depending on the sale amount, the type of sale (i.e., whether it includes taxable and non-taxable items), and who issues the tax invoice. 

Tax invoices for sales above $1,000

You must include the buyer’s identity or ABN in tax invoices for sales amounting to $1,000 or more, in addition to the standard information required for sales under $1,000. Such an invoice can also be used for transactions of lesser amounts.

Tax invoices with taxable and non taxable items

When preparing a tax invoice that includes both taxable and non-taxable items, you must ensure to clearly indicate which items are subject to taxation. Non-taxable items, such as those falling under the GST free or input-taxed categories, should be explicitly distinguished.

Essential Details to Include

• Breakdown of Taxable Sales: It should present a clear breakdown of each taxable sale, enabling easy identification.
• Amount of GST: The invoice must specify the amount of Goods and Services Tax (GST) applicable to the taxable items.
• Total Amount Payable: Clearly state the total amount to be paid, considering both taxable and non-taxable items.

Recipient created tax invoice (RCTI)

In specific cases, you, as the purchaser or recipient of goods or services, can issue your own tax invoice, known as a recipient-created tax invoice (RCTI).

Eligibility to Issue an RCTI
You can issue an RCTI if the following conditions are met:

• Both Parties Registered for GST: You and the supplier are both registered for GST at the time of RCTI issuance.
• Written Agreement: You and the supplier have a written agreement stating that you may issue an RCTI, and the supplier will not generate a tax invoice.
• Current and Effective Agreement: The agreement is current and effective when you issue the RCTI.
• Commissioner’s Determination: The Commissioner (ATO) has determined that the specific type of goods or services sold under the agreement can be invoiced using an RCTI.

Requirements for the Written Agreement
The written agreement between you and the supplier must include the essential requirements outlined in the determination. You can either use a separate document specifying sales details or embed the necessary information within the tax invoice.

For creating RCTIs, you can use the “Recipient-created tax invoices form” as a template or reference guide. Ensure compliance with all requirements to facilitate seamless transactions and accurate tax invoicing.

Validity of Recipient-Created Tax Invoices (RCTIs)
For an RCTI to be valid, it must provide sufficient information to clearly establish compliance with tax invoice requirements and explicitly indicate its nature as a recipient-created tax invoice, distinct from a standard tax invoice.

An RCTI must contain enough information to fulfill the requirements of tax invoices while explicitly stating that it is a recipient-created tax invoice and not a standard one.

The RCTI must display the Australian Business Numbers (ABNs) of both the suppliers and the purchaser.

If GST is applicable, the RCTI must indicate that it is payable by the supplier.

Responsibilities of the Recipient
As the recipient, you are required to:

• provide the supplier with either the original or a copy of the Recipient-Created Tax Invoice (RCTI) within 28 days, either from the date of the sale or from the date when you determine the value of the sale.
• retain the original or a copy of the RCTI for your records.
• reasonably comply with all your obligations under the tax laws.

When it comes to accounting for GST there are two options: cash basis and non cash basis (accruals).

The choice of method impacts the timing of GST reporting. If your business’s aggregated turnover (including closely associated entities) is below $10 million, or if you use cash accounting for income tax, you have the flexibility to use either method.

However, larger businesses are generally required to use the non-cash method.

It’s worth noting that even if a business uses cash accounting or simplified accounting methods, they can still opt for Simpler BAS reporting as long as their GST turnover remains under $10 million.

GST Cash Basis Accounting

If your business has an aggregated turnover of less than $10 million, you have the option to adopt the cash accounting method for GST.

With cash accounting, you record GST on your business activity statement when you actually receive payments for sales or make payments for purchases. This means that you report GST based on the cash flow of your business during the specific period covered by the activity statement.

The cash accounting method offers several advantages:

• It provides a better alignment between the money coming in and going out of your business with your activity statement liabilities, making it simpler to manage your cash flow.
• It is particularly suitable for smaller businesses that primarily deal with cash transactions.

Eligibility and criteria for using cash accounting method for GST

The cash accounting method for GST can be used under the following circumstances:

1. If you qualify as a small business entity, which means you are an individual, partnership, trust, or company with an aggregated turnover of less than $10 million.
2. If you are not actively conducting a business, but your enterprise’s GST turnover remains at $2 million or less.
3. If you currently account for income tax on a cash basis.
4. In specific cases, even if your GST turnover exceeds the mentioned thresholds, you might still be eligible for cash accounting if your enterprise falls into any of the following categories:

• Government school
• Endorsed charitable institution or trustee of an endorsed charitable fund
• Gift-deductible entity (except those operating a fund, authority, or institution capable of receiving tax deductible gifts or contributions).

If you don’t fall into any of the above categories but still prefer to use the cash accounting method for GST, you have the option to request permission for this approach.

Sales

For your sales, you need to account for the GST payable in the specific reporting period when you receive the payment for those sales. If you receive only a partial payment for a sale during a reporting period, you will only account for the corresponding GST on the received portion of the payment.

Purchases

For your purchases, you account for the GST credits in the reporting period when you make the payment for those purchases. However, it’s essential to have a valid tax invoice to claim a GST credit, unless the purchases cost $82.50 or less.

While it is beneficial to claim your GST credits in the reporting period corresponding to the purchases they are related to, you are not obligated to do so. You have a window of four years to claim these credits.

In case you make a partial payment for a business purchase during a reporting period, you can claim the GST credit only for the portion of the cost that you paid.

GST Non Cash Basis Accounting

The non-cash accounting method is typically required for larger businesses, while small businesses have the flexibility to choose between the cash method and the non-cash method.

Opting for the non-cash method means that you account for GST on your business activity statement in the reporting period when either of the following occurs:

• You receive any payment or issue a tax invoice before receiving payment for a sale.
• You receive the invoice from your supplier before making the payment or when you actually make the payment for a purchase.

This method is more suitable for businesses that don’t receive immediate payments and provides several advantages:

• It allows you to track your actual financial position accurately by monitoring what you are owed and what you owe.
• It proves beneficial when dealing with multiple contracts and handling substantial sums of money.

However, it’s essential to note that non-cash accounting can be more intricate compared to cash accounting, and you may require assistance from a registered tax or BAS agent to ensure accurate implementation.

Sales

For your sales, you need to account for the GST payable in the reporting period when you either issue a tax invoice or receive full or partial payment, whichever comes first.

In practical terms, if you receive payment from a customer before you have issued the tax invoice for the transaction, you are still required to report the GST amount in the reporting period during which the payment was received.

This applies even if the reporting period for the payment does not align with the period in which you eventually issue the invoice.

Purchases

To claim a GST credit on your purchases, you must have a valid tax invoice.

While it is beneficial to claim your GST credits in the reporting period when you either receive the tax invoice from your supplier or make some payment (whichever comes first), it is not mandatory. You have a time frame of four years to claim these credits.

Switching GST Accounting method

Changing accounting methods is possible if you meet the eligibility criteria. To initiate the process, you can either directly contact the appropriate authority or have your accountant do so on your behalf.

When switching from the cash method to the non-cash method, the change can only take effect at the beginning of a tax period.

In the first tax period following the change, there are certain adjustments that need to be made. Specifically, you must account for sales or purchases that were not previously recorded or claimed.

During this initial tax period of using the non-cash method, you are required to:

• Report the GST on any sales for which you had already issued invoices before the date of the change but had not yet received the payment.
• Account for the remaining balance of GST on any sales that had been partially accounted for before the change.

Additionally, you have the opportunity to claim any unclaimed GST credits for which you possess a valid tax invoice during that first tax period under the new accounting method.

Simplified GST accounting methods for food retailers

Small food retailers like bakeries, milk bars, and convenience stores often deal with both taxable and GST free sales.

If you as a retailer lack sufficient point-of-sale equipment to accurately track taxable and GST free sales, you have the option to use GST Simplified Accounting Methods (SAM) specifically designed for food retailers. There are five SAMs you can use to estimate your GST-free sales and/or purchases:

• Business norms – applies business norms percentages to your sales and purchases. This is the simplest method but can only be used by specified business types including bakeries, health food shops and convenience stores.
• Stock purchases – uses information relating to your purchases to estimate your GST-free sales.
• Snapshot – take a snapshot of your trading to estimate your GST-free sales and GST-free purchases.
• Sales percentage – work out what percentage of GST-free sales you make in a tax period and apply this to estimate your GST-free purchases. Available to supermarkets, groceries and convenience stores.
• Purchases snapshot – take a snapshot of your purchases and use this sample to calculate your GST credits. Available to restaurants, cafés and caterers only.

To use a SAM you must meet the basic eligibility conditions:

• you make both taxable and GST-free sales of food (or, for the purchases snapshot method, you buy both taxable and GST-free food)
• your relevant turnover is not more than $2 million.

Which SAM you can choose also depends on:

• whether you’re a converter or reseller – if you’re both, you’re treated as a converter
• whether you have adequate point-of-sale equipment for distinguishing GST-free and taxable sales
• whether you sell both taxable and GST-free food on the same premises.

Reporting and paying GST is determined by your GST turnover and will fall under one of three cycles:

• Monthly Cycle: If your GST turnover is $20 million or more, you must report and pay GST on a monthly basis.
• Quarterly Cycle: If your GST turnover is less than $20 million, you will report and pay GST quarterly unless specifically instructed to do so monthly by the ATO.
• Annual Cycle: Businesses that have voluntarily registered for GST and have a GST turnover below $75,000 (or $150,000 for not-for-profit bodies) have the option to report and pay GST on an annual basis.

A BAS (Business Activity Statement) enables you to report and submit payments for various taxes including:

• GST: This is a tax applied to most goods and services provided in Australia.
• Pay As You Go (PAYG) Instalments: These are periodic payments made towards income tax to avoid a large lump sum at the end of the financial year.
• PAYG Withholding Tax: This is income tax withheld from employees’ wages to meet their income tax obligations.

Monthly GST reporting

If your business has a GST turnover of $20 million or more, it is mandatory to report and pay GST on a monthly basis.

Full reporting method

If your business’s GST turnover is $10 million or more, you are required to use the full reporting method for GST.

Alternatively, you may choose to use the full reporting method in the following situations:

• If your GST turnover is less than $10 million but your aggregated turnover is greater than $10 million for either the previous year or the current year.
• If the main business activity or enterprise of your business involves making input taxed supplies.

With the full reporting method, you are obligated to calculate, report, and pay your GST amounts on a monthly basis. This method involves providing more detailed information on your BAS.

To work out your GST amounts for the BAS, you have the flexibility to use either the accounts method or the calculation worksheet method.

What to include in your monthly BAS

If you are reporting and paying GST on a monthly basis and your GST turnover is $10 million or more, you are required to provide specific details on your BAS each month. These details include:

• G1: Total sales
• G2: Export sales
• G3: Other GST free sales
• G10: Capital purchases
• G11: Non-capital purchases
• 1A: GST on sales
• 1B: GST on purchases

Additionally, if your business has obligations or entitlements related to Wine Equalisation Tax (WET), Luxury Car Tax (LCT), or Fuel Tax Credits (FTC), you must also report the relevant amounts each month using the appropriate labels.

To calculate your GST amounts for reporting, you have the option to use either the accounts method or the calculation worksheet method.

Simplified GST reporting

For businesses with a GST turnover of less than $10 million, there is an option to use the Simpler BAS reporting method when reporting on a monthly basis.

With the Simpler BAS method, you are required to provide fewer details on your monthly activity statement while still calculating and paying your GST amounts each month.

If your business’s GST turnover is less than $10 million, you will report the following amounts on your BAS each month:

• G1: Total sales
• 1A: GST on sales
• 1B: GST on purchases

Under the Simpler BAS reporting method, you are not required to report the following amounts on your BAS:

• G2: Export sales
• G3: Other GST free sales
• G10: Capital purchases
• G11: Non-capital purchases

Moreover, if your business has obligations or entitlements related to Wine Equalisation Tax (WET), Luxury Car Tax (LCT), or Fuel Tax Credits (FTC), you must report these amounts each month using the appropriate labels.

Quarterly GST reporting

For businesses with a GST turnover under $20 million, and if you haven’t been specifically instructed to report GST on a monthly basis, you have the option to report and pay GST on a quarterly schedule.

As discussed earlier, when you choose to report GST quarterly, you can utilize the following methods:

• Full Reporting Method
• Simpler BAS Reporting Method

GST instalments method

You have the option to choose the GST Instalments Method for reporting if you meet the specific eligibility criteria, including the following scenarios:

• If you operate a business with an aggregated turnover of less than $10 million.
• If you are not engaged in business activities (e.g., a not-for-profit organization) and your GST turnover is $2 million or less.

Under this reporting method, you make quarterly GST instalment payments, which are calculated by the ATO (with the possibility to adjust them). However, the reporting of your actual GST information is done on an annual basis through an annual GST return.

The GST Instalments Method offers the convenience of paying GST on a quarterly basis, while your comprehensive GST reporting is consolidated into a single annual return.

Quarterly GST reporting and payment dates

Quarter	Payment and Lodgment Date
September quarter	28th October
December quarter	28th February
March quarter	28th April
June quarter	28th July

If you have opted to pay through GST instalments, your instalment payments are also due on the aforementioned dates.

Primary producers or special professionals who are required to pay only two GST instalments throughout the year have their instalment due dates set on 28th April and 28th July.

In case the due date falls on a weekend or a public holiday, businesses have until the next business day to complete their reporting and payment.

Regarding the annual GST return, if you pay GST instalments, it will be due on the same date as your income tax return. For businesses not required to lodge an income tax return, the annual GST return is due by 28th February following the financial year covered by the return.

Changing GST reporting methods

The reporting method you use for GST is directly linked to your GST turnover. If your GST turnover exceeds or falls below $10 million, your reporting method will change accordingly.

If you change your GST reporting method with the ATO before 28th October, the changes will typically come into effect from 1st July of that financial year.

If you lodge your September quarter activity statement through a tax agent, the effect of the change will be based on the tax agent concessional due date.

If you change after 28th October, the change will normally take effect from 1st July of the following financial year.

Annual GST reporting

If you are voluntarily registered for GST and your turnover is under $75,000 (or $150,000 for not-for-profit bodies), you have the option to report and pay GST annually.

If eligible and opted for annual reporting, no GST reporting or payment is required throughout the year. Instead, at the end of the financial year, you must report and pay the GST amount due.

Simpler BAS reporting method for annual GST reporting

If you choose to report and pay GST annually, the Simpler BAS reporting method is applicable, and the full reporting and instalment methods are not available for this option. 

With the Simpler BAS reporting method, businesses are obligated to provide less comprehensive information on their Annual GST return. This streamlined approach reduces the reporting burden, as you calculate and pay your GST amount only once a year.  

The simplified process makes GST reporting more efficient and less time-consuming for eligible businesses. 

Timing of making an annual reporting election

To opt for annual GST reporting, you have a specific timeframe at the beginning of each financial year during which you can make your election. The election period extends from 1 July and ends on:

• 21st August: If you currently report GST monthly
• 28th October: If you currently report GST quarterly

There are exceptions to the election period in the following cases:

• If you have been registered for GST for six months or less.
• If you became eligible for annual reporting after 28th October in the relevant financial year.

In both these scenarios, you have until the first day you are required to lodge a GST return after becoming eligible for annual reporting to make the election for reporting annually.

Effective date of your election

The effect of your election to report annually will commence from the beginning of the earliest tax period for which your activity statement is not yet due.

For example:

• If you currently report GST monthly and make the election by 21st August, your election will take effect from 1st July of the year in which you elect (since the activity statement for July is not due until 21st August).
• Similarly, if you currently report GST quarterly and make the election by 28th October (the day your quarterly statement is due), your election will take effect from 1st July of the year in which you elect.

GST Adjustment

A GST adjustment is necessary when certain events, called adjustment events, take place, leading to changes in the amount of GST you either owe or can claim as credit. These adjustment events can occur during the sale or purchase of goods or services.

You must make a GST adjustment if the following conditions are met:

• An adjustment event happens in a specific reporting period for your sale or purchase.
• You previously recorded the sale or purchase in your activity statement for a prior reporting period.
• The GST amount you initially reported is no longer accurate due to the adjustment event.

Thus, adjustments are made to ensure that the correct amount of GST is accounted for and reported based on the occurrence of these events during your business transactions.

When you become aware of the need for an adjustment in the GST you owe or can claim, you typically report it in your current reporting period’s BAS.

If your GST accounting is based on a cash basis and you are required to make a payment due to an adjustment event, you generally make the adjustment in the activity statement for the reporting period when the payment is made.

In situations where you made only a partial payment of the required GST amount in a specific reporting period, you should make an adjustment in that particular period’s activity statement, reflecting the amount you paid.

Adjustment events related to sales encompass the following scenarios:

• Cancelled Taxable Sale: When a taxable sale you made gets canceled, such as when a customer returns goods, and you refund the purchase price to the customer.
• Price Change for Taxable Sale: If the price of a taxable sale you made changes, like providing a rebate to a customer.
• Event Changes Tax Status of a Sale: When an event causes your initially GST free sale for export to remain within the country, subsequently making it taxable.
• Sale Ceases to be Taxable: An event occurs that causes a sale to no longer be subject to GST.

Adjustments for sales

When you are required to make an adjustment for a sale you previously made, the adjustment amount falls into one of the following categories:

Decreasing Adjustment: If, after considering the adjustment event, you realize that you paid more GST originally than the amount now payable, you are eligible for a decreasing adjustment. This means you pay less GST for the current reporting period.

Before reporting this adjustment on your activity statement, you must reimburse the customer for the difference.

Increasing Adjustment: On the other hand, if the adjustment event reveals that you paid less GST initially than the amount now payable, you need to make an increasing adjustment. This implies that you pay more GST for the current reporting period.

Adjustment events concerning purchases encompass the following situations:

• Cancelled Purchase: When a purchase you made is canceled, and you receive a full refund for the goods you returned.
• Price Change for Purchase: If the price of a purchase you made changes, such as receiving a rebate on the original purchase price.
• Event Makes Purchase Creditable: An event occurs that renders your purchase eligible for a GST credit.
• Purchase Ceases to be Creditable: An event occurs that causes your purchase to no longer be eligible for a GST credit.

Adjustments for purchases

When you need to make an adjustment for a purchase you previously made, the adjustment amount falls into one of the following categories:

Increasing Adjustment: If, upon considering the adjustment event, you find that you claimed more for the purchase in the earlier tax period than the amount you could have claimed if the adjustment event had been taken into account, you are required to make an increasing adjustment.

This means you need to adjust for the excess GST claimed in the current reporting period.

Decreasing Adjustment: Conversely, if you claimed less for the purchase in the earlier tax period than the amount you could have claimed if the adjustment event had been considered, you need to make a decreasing adjustment. This implies you should adjust for the additional GST credit you are eligible for in the current reporting period.

How to make GST adjustments

When reporting GST on your activity statements, the approach you use depends on whether you follow the full reporting method or the Simpler BAS reporting method. Each method has its own way of calculating and reporting GST adjustments.

Accounts Method
(Applicable to BAS Full Reporting Method and Simpler BAS Reporting Method

If you utilize the accounts method, you determine the GST amounts for both your sales and purchases from your accounting records. Subsequently, you report these figures on your BAS.

a. For Full Reporting Method:

• For Increasing Adjustments, report at “Label 1A” on your BAS.
• For Decreasing Amounts, report at “Label 1B” on your BAS.

b. For Simpler BAS Reporting Method:

• Use the Accounts Method to complete each BAS.

Calculation Worksheet Method
(Applicable to Full Reporting Method only)

If you opt for the calculation worksheet method under the full reporting method, you calculate the overall adjustment amount and then multiply it by 11.

You will need to show this adjusted amount at either “G7 (adjustments)” for overall increasing adjustments or “G18 (adjustments)” for overall decreasing adjustments on the GST calculation worksheet.

The specific amounts you report on your activity statement will vary depending on whether you report on a cash basis (recording transactions based on cash inflow/outflow) or non-cash basis (recording transactions based on invoicing dates).

Types of GST adjustments

Below are various types of adjustments that may arise when accounting for GST:

Bad Debt Adjustment: If you account for GST on a non-cash basis and face a situation of bad debt (e.g., unpaid invoice), you may need to adjust the GST previously claimed on that sale.

Changes in Creditable Purpose: When the extent of the creditable purpose (business use) of a purchase changes, adjustments are required to ensure accurate GST credits are claimed for business-related expenses.

Annual Apportionment Adjustments: Businesses eligible for annual apportionment can claim the entire GST amount on a purchase as a credit and make a single adjustment annually, instead of apportioning GST for business and private use at the time.

Third-Party Payments: In cases where a business supplies a product for re-sale through a third party and makes a payment related to the payee’s purchase, a third-party payment decreasing adjustment may be necessary.

Company Mergers: When companies merge and continue as one, the new company must make adjustments that the merged companies would have had to make if they hadn’t merged, considering changes in business use.

Change to Taxable Sale: A decreasing adjustment may occur if a purchase used for private use or financial sales is later sold as a taxable item.

Purchases of Going Concerns: When purchasing a business as a GST free supply of a going concern, an increasing adjustment may arise if there are plans to make non-taxable or non-GST free sales through the acquired business.

Unredeemed Vouchers: If a business sells unredeemed vouchers and writes back reserves for their redemption, an increasing adjustment is necessary.

Tradex Scheme Goods: Importers under the Tradex scheme must follow specific procedures; any deviation may result in an increasing adjustment.

GST Registration: Registering for GST allows a decreasing adjustment for already purchased stock to claim input tax credits.

Gross-up Clauses: Gross-up clauses can trigger adjustments to ensure the correct amount of GST is accounted for when there is a change in a supply contract’s consideration.