Goods and Services Tax (GST) is a significant part of running a business in Australia. Whether you’re a sole trader, a growing enterprise, or managing a new startup, understanding what you need to know about GST compliance is critical for maintaining good standing with the Australian Taxation Office (ATO).

From registration through to BAS reporting, every step of your GST obligations must be handled correctly. If you’re unsure about your position, consulting an experienced accountant Brighton business owners rely on can help guide you through the process.

Understanding GST and When It Applies

Definition and Scope of GST

GST is a broad-based tax of ten percent on most goods, services, and other items sold or consumed in Australia. 

It applies to a wide range of industries and sectors, including retail, hospitality, construction, and professional services. Businesses collect GST on taxable sales and are responsible for forwarding it to the ATO.

GST does not apply to all items. Some goods and services are GST-free or input-taxed, which affects how they are reported and whether GST credits can be claimed.

Who Needs to Register for GST

You must register for GST if your business or enterprise has an annual turnover of seventy-five thousand dollars or more. 

This includes total revenue before expenses. If you are a not-for-profit organisation, the threshold is one hundred and fifty thousand dollars. Regardless of turnover, anyone providing ride-share or taxi services must register for GST from the first dollar earned.

Failure to register on time can result in owing backdated GST on previous sales, which cannot be recovered from customers after the fact. It’s better to register early if you anticipate reaching the threshold soon.

Registering for GST: The Basics

How to Register

GST registration can be done online using the Australian Business Register, through the ATO Business Portal, or by engaging a registered tax agent. You will need an Australian Business Number (ABN) to complete your registration.

Once registered, you will receive a GST registration date, and from that point forward, you are legally required to include GST on applicable sales and issue compliant tax invoices.

Choosing an Accounting Method

When registering, you must nominate an accounting method. Most small businesses choose the cash basis, which means you report GST when payments are actually received or made. 

The accrual method requires you to report GST when invoices are issued, regardless of when money changes hands.

Choosing the correct method for your situation helps align your cash flow and avoids issues when it’s time to submit your Business Activity Statement (BAS).

Invoicing and Documentation Requirements

Issuing Compliant Tax Invoices

Once your business is registered for GST, any sale that includes GST must be accompanied by a tax invoice. These invoices must contain specific details such as the term “Tax Invoice”, your business name, ABN, date of issue, and a description of the goods or services sold.

If the total is over eighty-two dollars and fifty cents including GST, you must also clearly show the amount of GST included in the price or state that GST is included.

Keeping Accurate Records

Good record-keeping is a core part of GST compliance. Businesses must keep all tax invoices, receipts, payment records, and documentation for at least five years. These records should be kept in a legible format and be accessible if requested by the ATO during an audit or review.

Cloud accounting software makes it easier to organise records, but paper-based systems are still acceptable provided all required information is retained.

Claiming Input Tax Credits

Eligibility for Credits

You can claim back the GST paid on business-related purchases as input tax credits, provided the purchase was for business use, and you hold a valid tax invoice. 

The item must be used in the course of your enterprise. If an expense is partially for personal use, only the business portion is claimable.

Credits must be claimed in the same BAS period where the invoice was issued, unless you are using the cash method, in which case you claim when payment is made.

Common Credit Errors

Businesses sometimes incorrectly claim GST on expenses that are not eligible. Common mistakes include claiming on entertainment expenses, wages, and purchases from suppliers who are not registered for GST. These errors can lead to adjustments, penalties, or interest charges.

Lodging Business Activity Statements (BAS)

Understanding Your BAS Obligations

Businesses registered for GST are required to lodge a BAS, which reports the GST collected on sales and the GST paid on purchases. Your BAS must be lodged monthly, quarterly, or annually depending on your turnover and business type.

Quarterly lodgement is common for small businesses, and statements must be submitted even if there is no GST payable for the period.

Calculating and Reporting GST

To calculate GST payable, add up the total GST collected on your sales, then subtract any input tax credits from GST paid on purchases. If the result is positive, that amount is payable to the ATO. If input credits are higher, you may be entitled to a refund.

It is important to ensure the figures reported are accurate and backed by corresponding documentation in your accounting records.

Avoiding GST Compliance Mistakes

Late Registration or Lodgement

One of the most frequent errors is failing to register for GST when required. This can lead to significant tax liabilities that were not accounted for in pricing. 

Similarly, lodging your BAS late can result in penalties or interest charges. These can be avoided by using accounting software with automatic reminders or engaging a bookkeeper to manage compliance dates.

Using Incorrect GST Codes

In accounting software, applying the wrong tax codes to transactions leads to misreporting. This often happens when new users are unfamiliar with the system or rush through data entry. 

Double-checking entries and performing monthly reconciliations reduces the chance of mistakes.

GST and International Transactions

Treating Exports Correctly

Exports of goods and certain services are usually GST-free, provided they meet the eligibility rules. Goods must be physically exported from Australia within sixty days of payment or invoice, and services must be provided to an overseas client and used outside of Australia.

Failing to treat exports correctly can lead to underreporting or missed opportunities to benefit from zero-rated supplies.

Importing Goods Into Australia

GST is usually applied at the border for imported goods. Businesses that are registered for GST can generally claim input tax credits for the GST paid on imported goods, provided they use them in their business. 

To claim these credits, you need to hold import documentation such as customs declarations and invoices.

Practical Ways to Keep Your Financial Records in Order

Maintaining good financial records is essential for staying on top of your GST compliance. One of the best ways to do this is by using accounting software that automatically tracks your income, expenses, and GST obligations. 

These systems can prepare BAS reports, store receipts, and sync with your bank for accurate transaction reconciliation.

Reconciling your accounts monthly ensures that the GST reported matches your actual financial activity. This step helps detect errors early and gives you time to correct issues before the BAS due date.

Always keep copies of invoices, contracts, and payment confirmations, especially for high-value transactions. These documents provide the evidence needed in case the ATO requests supporting details for your GST claims.

If you’re managing a growing business, consider outsourcing your bookkeeping or consulting a qualified accountant. This not only saves time but also reduces the chance of making costly GST mistakes.

Frequently Asked Questions

What happens if I don’t register for GST when I should?

If your business earns over the threshold and you fail to register, the ATO may backdate your registration. This means you will owe GST on all taxable sales made from the date you were required to register. You may also be subject to penalties and interest.

Can I claim GST on all my business purchases?

Not all business expenses include claimable GST. You cannot claim GST on private purchases, wages, or supplies from businesses that are not registered for GST. Always check that your supplier is registered and that the invoice includes GST before claiming.

How long do I need to keep GST records?

You must keep your GST records for at least five years. This includes invoices, receipts, bank statements, and BAS submissions. These can be kept digitally or on paper but must be accessible and readable if requested by the ATO.

Conclusion

Knowing what you need to know about GST compliance gives you a clearer path to meeting your obligations and avoiding unnecessary penalties. From registration to reporting, GST compliance requires consistent attention to detail and proper record-keeping.

Working with professionals such as an accountant Brighton business owners depend on can ensure that your systems are set up correctly from the start. 

With the right processes in place, GST becomes a manageable part of your business operations, rather than a burden at tax time. Maintaining compliance not only keeps you in the ATO’s good books but also builds trust with customers, suppliers, and financial institutions.