Friday, July 1, 2011

What is GST and How it works








Goods and Services Tax (GST) is a broad based tax on the supply of most goods and services consumed in Australia. The GST rate is 10%.


The GST commenced on July 1, 2000. Basic foods, some health services and export are granted GST free.

GST is paid at each step in the supply channel. If your business is a consumer of goods and services then you must pay a 10% tax on the product you buy to operate your business. 

If you are registered for GST, the 10% tax paid (input tax credits) will normally be able to claim back from The Australian Taxation Office (ATO).  As a business owner of goods and services you will need to charge your clients 10% extra on top of your goods and services every time a customer buys from you. This means that GST liability flows along the supply channel, and is actually included in the price paid for by the consumer, who cannot claim the input tax credits.

The liability to pay GST rests on the supplier of the goods and services, not the customer. Therefore, even if you do not include GST on the price of goods and services you provide, you are still liable to pay the 10% tax to the ATO. In other words you as a business owner will in fact be collecting tax on behalf of the government.

The amount of GST that you eventually pay to the ATO is the difference between what you have paid in GST to buy goods and services, and what you have collected in GST from your customers. This reports on a single form called The Business Activity Statement (BAS). Most businesses do this quarterly.

There are many things to consider when you are starting a small business. Not every business needs to register for GST. You must register for GST if you fulfil both of the following criteria:
  • You are carrying on an enterprise
  • You’re annual turnover will exceed $75,000
Your turnover does not have to reach $75,000; you meet the turnover threshold when it appears you will exceed $75,000. You must also register for GST if you provide taxi travel as part of your business.

If your are a new start up it is best for you to consult with your accountant  to see whether your business situation requires to register for GST.


To Learn more about GST  for your business. Please visit ATO Website:


http://www.ato.gov.au/





2 comments:

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