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If you run a small business or work as a freelancer, getting a handle on GST is more important than you might think. It’s not just about ticking legal boxes — it impacts how you set your prices, manage your cash flow, and deal with customers and suppliers every day. Let’s break down the impact of GST on small businesses and how you can manage it effectively
GST is a tax of 10% applied to most goods, services, and other items sold or consumed within Australia. Businesses registered for GST must add this amount to their taxable sales and report it to the Australian Taxation Office (ATO) through Business Activity Statement (BAS). It affects a wide range of everyday transactions, from retail products and professional services to digital downloads and meals. Some goods and services such as basic food items, healthcare, and education are GST-free, but GST applies to most other items.
You must register for GST in Australia when your business’s gross income (not profit) reaches $75,000 in a financial year. This is known as the GST threshold Australia rule. If you don't register when you’re supposed to, you could face serious penalties. You’ll also be required to pay GST on past sales, even if you didn’t charge it at the time.
Some businesses choose voluntary GST registration even if they’re under the threshold because it allows them to claim GST tax credits on expenses, be prepared for when they do hit the threshold, and look more professional to bigger clients.
Before you can register for GST, you must have an Australian Business Number (ABN). You can apply for it online through the Australian Business Register (ABR) website.
You will need to provide this number, as well as your business structure details, and estimated turnover. After registering, the ATO will confirm your GST status, and you will be responsible for adding GST to your sales, lodging BAS and meeting all related reporting requirements.
There are a few common mistakes to watch out for as they can cause delays or lead to compliance issues down the track. One frequent error is entering incorrect business details that do not match existing ATO records. Another common issue is selecting the wrong GST registration date. If you start issuing GST-inclusive invoices before you are officially registered, you could be penalised.
A BAS, or Business Activity Statement, is a form submitted to the ATO that reports your business’s tax obligations, including GST, PAYG withholding, and other taxes. If your business is registered for GST, lodging BAS is a mandatory part of staying compliant.
You can lodge your BAS online through the ATO’s Business Portal, through your registered tax or BAS agent, or by mailing a paper form. Most small businesses lodge quarterly, but some may be required to lodge monthly depending on turnover and circumstances.
Small businesses often make mistakes when lodging their BAS, including misreporting income, incorrectly claiming GST credits, missing deductions, or submitting late. Inaccurate records and rushing to lodge at the last minute are major causes of errors.
Darcy Bookkeeping and Business Services offers expert BAS services to take the stress out of reporting and help you stay compliant.
One of the main benefits of GST registration in Australia is the ability to claim GST tax credits. These let you recover the GST paid on business purchases, reducing your net GST payable.
To claim GST credits accurately, make sure your purchases are directly related to your business and that you have a valid tax invoice from a GST-registered supplier. Check that GST is clearly listed on the invoice and store digital copies for your records. Before lodging your BAS, double-check your claims to avoid errors that could trigger ATO penalties.
Keep digital copies of every tax invoice and receipt. If you can’t prove your claims during an ATO audit, you could lose your credits and face penalties.
Adding GST affects more than just your invoices. It impacts your pricing strategy, cash flow, and accounting setup. When you add GST to your prices, be clear whether the price is GST-inclusive or exclusive. Some small businesses absorb GST within their pricing; others add it on top.
Managing your GST payments can strain your cash flow if you don’t plan ahead. Set aside your GST collections in a separate account so you’re not scrambling when BAS time comes.
Make sure your invoicing and accounting systems automatically track GST. Manual systems create easy opportunities for mistakes that could cost you.
Good software makes GST compliance for small and medium sized enterprises (SMEs) much easier.
Tools like Xero, MYOB, and QuickBooks automate GST tracking, invoicing, and BAS reporting.
Tax laws and GST requirements can change over time. It’s important to stay on top of things by regularly checking ATO updates and subscribing to reputable business tax newsletters.
Many small businesses hire bookkeepers or accountants to manage their GST obligations. Financial experts not only ensure accuracy but also keep up to date with the latest changes.
Hiring a professional takes the stress out of managing GST obligations. A qualified bookkeeper ensures your BAS is lodged accurately and on time, helps you maximise GST credits, and keeps your records ATO-ready. Partnering with an expert not only reduces the risk of fines but also gives you peace of mind and more time to focus on growing your business.
Managing GST and BAS for small businesses properly is essential for staying compliant, financially healthy, and prepared for growth. Understanding when to register for GST, how to lodge your BAS accurately, and how to claim GST credits can make a big difference to your cash flow and peace of mind.
If you’re unsure about any part of your GST compliance, or you simply want to make life easier, reach out to us today at Darcy Bookkeeping and Business Services or call us on 1300 728 875.
You must register for GST within 21 days of exceeding the threshold, even if it happens mid-year. Future sales must include GST, but you don’t need to go back and adjust earlier sales.
GST applies to digital products sold to Australian customers, even if the seller is overseas. For exports, GST usually doesn’t apply, but it’s essential to document these transactions correctly.
GST generally applies to imported goods over $1,000. Importers must pay GST at the border unless their freight carrier handles it. Shipping costs can be GST-free or taxable, depending on how they're charged.
Not exactly. GST is collected on behalf of the government. It’s not your revenue—you’re a middleman passing it on. You also get GST credits for your business expenses.
It can feel that way, but it’s not double-taxing. Businesses claim back the GST they pay on purchases through GST tax credits. They only pass the net amount to the ATO.
Sometimes. If you have few expenses, you might collect more GST than you claim. But registration also allows you to work with larger clients who require GST invoices. Voluntary registration can still be beneficial depending on your growth plans.
