To those who are just starting out their business, congratulations on taking that first step. The commercial environment can be a complicated one and you will need to have a firmer grip on the regulations businesses as your business continues to grow. Once you have registered your Tax File Number (TFN), and Australian Business Number (or Australian Company Number (ACN)), you will need to check out the taxes you may be liable to pay. For most businesses, this would include the Goods and Services Tax (GST).
It is highly likely that your business would require to be registered for GST, which is a broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. It is levied on most transactions in the production process and however, registered businesses in the production chain are entitled to a credit for any GST paid for the business’s expenditures on these goods and services as well as capital purchases.
You will need to register for GST if your GST turnover is over $75,000 or more. The GST turnover is the gross business income, not profit, which excludes GST you included in sales to your customers, sales are not for payment and are not taxable, sales not connected with an enterprise you run, input-taxed sales you make, and sales not connect with Australia. If your projected GST turnover, your total turnover for the current month and the next 11 months, is likely to be $75,000 or more, your business will also need to registered for GST. For not-for-profit organisations, the GST turnover threshold is $150,000 instead of $75,000.
Additionally, if your business provides taxi travel services in exchange for a fare, you are also required to register for GST, regardless of your GST turnover. Thus, taxi owner-drivers and people who rent taxis are subject to the GST.
If you are registered for GST, you will have to collect one-eleventh of the sale price, of your GST product or service, from your customers to pay the GST. This additional collection needs to be paid by you business to the Australian Taxation Office (ATO) when it is due.
If you do not register for GST, you would not have to include a GST component in your prices and this needs to be shown in any invoices you distribute. You will also be unable to claim GST credits for your business purchases. You will also be unable to claim potential Fuel Tax Credits (FTC), which your business may be eligible for.
The Australian Taxation System can be quite complicated for you as you are just starting out your business. There are both liabilities and benefits from the ATO that your business is exposed to which can be difficult to identity. If you need reliable tax advice for your business, whether big, medium or small, our dependable Tax Accountants in Melbourne will be able to provide sound guidance.