When you jump from side hustle, to main hustle and all of a sudden your business has turned-over $75,000 in a financial year!?
Goals! But what does this mean at tax time?
What is GST?
When you earn over $75,000 in a financial year you are required to pay Goods and Service Tax (GST) on your earnings regardless of the industry your business operates in. The GST is 10% of your earnings and you must register for GST within 21 days of hitting the threshold of over $75k in a financial year. If you don’t register for GST and are required to, you will need have to pay GST on sales made since the date you were required to register. This could happen even if you didn’t include GST in the price of those sales. You may also have to pay penalties and interest. If you do backdate a GST registration, you will be required to lodge any Business Activity Statements (BAS) that would have been due during this time period.
The idea of GST is you add the 10% extra onto your price/invoices. BAS is 10% of income less 10% of business expenses. The net amount is what is paid. You can register for GST by contacting the ATO via phone or through a Registered Tax Agent or BAS Agent (aka Empire!). We can do this for you and if you are a bookkeeping client it is included in our ‘Glow Up’ package. If you are a current client on a lower-tiered subscription, we simply upgrade your proposal to cover the additional lodgement requirements.
When you are registered for GST you need to lodge a Business Activity Statement (BAS). You must lodge your BAS statement on time – this is done quarterly by your accountant. Even if you have nothing to report for the quarter you still must lodge a statement. Your BAS will help you report and pay your: GST, Pay As You Go (PAYG) Instalments, PAYG Withholding Tax and other taxes. There are penalties when this is not completed on time. Should the time come when you are no longer required to be registered for GST, the registration is simply cancelled and you go back to lodging your tax return only, once a year.
Where Does This Money Go?
The government collects the GST and then distributes it all over Australia to pay for things like infrastructure, public services such as hospitals, public schools and roads. You are contributing to the society in which you live, which is not only extremely beneficial to you, but to the Australian economy.
Good to Know
Your BAS records are to be kept legally for 5 years, along with all your other records for your business from the date of lodgement.
Earning over $75,000 in a financial year does come with more paperwork, but with experienced industry accountants and an all-inclusive accountancy package, you won’t even need to think about it.