How to handle GST in bookkeeping?

Do these questions sound familiar?

• "Which GST reporting method is right for my business?"
• "How often do I need to lodge my BAS?"
• "What exactly do I need to report?"
• "Will I be penalised if I make a mistake?"

We heard you. We know how intricate GST is and how stressful it is to comply with the ATO's requirements. The good news is that with the right knowledge and guidance, managing GST doesn't have to be a headache.

What is GST?

The Goods and Services Tax (GST) is a broad-based tax applied at a rate of 10% on most goods, services, and other items sold or consumed in Australia. GST is collected by businesses at the point of sale and paid to the ATO.

Businesses must include GST in the sale price of taxable items unless those items are specifically exempt or GST-free. Every business that charges GST must be registered for GST and hold an Australian Business Number (ABN). Understanding and complying with GST requirements is crucial for businesses to avoid penalties.

Goods and services affected by GST

Most goods and services sold in Australia are subject to GST. This includes everyday items such as food and drinks, clothing, electronics, and household goods, as well as services like professional consultations, repairs, and entertainment.

However, some sales are GST-free, including basic food items, certain healthcare services, and educational courses. Additionally, non-profit organisations and other specific entities may have different GST obligations or concessions on some transactions. Businesses must be aware of these distinctions to correctly charge and remit GST.

Who needs to report GST?

Businesses need to report GST if their GST turnover is $75,000 or more in a financial year. GST turnover is the total value of your sales and other business income, minus any GST-free sales.   

There are a few exceptions to this rule:

• Taxi drivers and ride-sourcing drivers: They must register for GST regardless of their turnover.
• Non-profit organisations: The GST registration threshold is higher for them, at $150,000 per year.   

Voluntary registration

Even if your turnover is below the threshold, you can choose to voluntarily register for GST. This can have some benefits, such as claiming back GST credits on your business expenses. However, it also means you'll need to charge GST on your sales and lodge regular BAS statements.   

Who doesn't need to report GST?

If your GST turnover is less than $75,000, and you're not a taxi or ride-sourcing driver, you generally don't need to register for GST and report it. However, you might still want to consider voluntary registration, depending on your circumstances.

Take this quiz to evaluate whether your business needs to register to GST.

GST compliance and reporting

Businesses in Australia need to comply with GST regulations by accurately reporting their taxable sales, claiming GST credits, and filing Business Activity Statements (BAS). These tasks ensure that the Australian Taxation Office (ATO) receives the correct amount of GST.

Filing Business Activity Statements (BAS)

A Business Activity Statement (BAS) is a form submitted to the ATO. It reports a business’s tax obligations, including GST. Companies must lodge a BAS either monthly, quarterly, or annually, depending on turnover.

The ATO offers several GST reporting methods, each tailored to businesses with different turnovers and reporting needs. Let's explore each one in detail:

1. Simpler BAS: The streamlined approach for small businesses

Simpler BAS is the default reporting method for businesses with a GST turnover of less than $10 million. It's designed to be straightforward and user-friendly, making it an ideal choice for small businesses.

Advantages

• No GST calculation worksheet: You won't need to complete a separate worksheet to calculate your GST liability.
• Simplified BAS Form: Paper activity statements and annual returns have sections that can be left blank if they don't apply to your business.

Reporting requirements

With Simpler BAS, you'll typically need to report the following on your monthly or quarterly BAS:

• G1 Total sales: This includes all taxable sales you've made.
• 1A GST on sales: This is the amount of GST you've collected from your customers.
• 1B GST on purchases: This is the amount of GST included in the price of goods and services you've purchased for your business.

Considerations

Simpler BAS is a great option for businesses that prefer a more streamlined reporting process. However, if your business grows and your turnover exceeds $10 million, you'll need to switch to the full reporting method.

2. GST instalment method: For annual reporters

If your GST turnover is under $10 million, and you report annually while paying GST instalments quarterly, the GST instalment method might be suitable.

How it works

• You'll receive a quarterly instalment notice from the ATO, indicating the amount of GST you need to pay based on your estimated annual turnover.
• When lodging your annual tax return, you'll reconcile the GST instalments you've paid with your actual GST liability.

Reporting requirements

On your annual GST return, you'll need to report:

• G1 Total sales
• 1A GST on sales
• 1B GST on purchases
• 1H GST instalment amounts reported in your quarterly instalment notices  

Considerations

The GST instalment method can be helpful for managing cash flow, as you'll spread your GST payments throughout the year. However, if you prefer to report your actual GST amounts rather than estimates, you can switch to Simpler BAS.

3. Full reporting method: For high-turnover businesses

If your GST turnover is $10 million or more, or you engage in specific activities like making input taxed supplies, you must use the full reporting method.

Reporting requirements

Full reporting requires more detailed information on your BAS, including:

• G1 Total sales
• G2 Export sales
• G3 Other GST-free sales
• G10 Capital purchases
• G11 Non-capital purchases
• 1A GST on sales
• 1B GST on purchases  

Full reporting is the most complex method, but it provides the ATO with a comprehensive view of your GST transactions. It's typically used by larger businesses or those with intricate GST affairs.

Lodging your BAS is easy with Thriday. You can do it all online, saving you time and hassle.

To learn more about how Thriday simplifies BAS lodgement and to get started, visit https://www.thriday.com.au/blog-posts/how-to-lodge-your-bas-with-thriday.

Calculating taxable sales

Calculating taxable sales involves determining the total value of goods and services sold that are subject to GST. Businesses must include all sales except those that are GST-free or input taxed.

This calculation impacts the amount of GST to be paid or refunded. Businesses should maintain detailed records of all transactions to ensure accurate reporting. Taxable sales are reported in the BAS to calculate the GST payable. This includes sales of goods, services, and certain other transactions.

Accurate calculation prevents underpayment or overpayment of GST, which could lead to reviews by the ATO.

Claiming GST credits

Businesses can claim GST credits for the GST included in the price of purchases related to their business. To claim these credits, businesses need valid tax invoices.

Businesses must ensure that the invoices comply with ATO requirements and detail the GST paid. GST credits reduce the amount of GST payable when lodging a BAS.

Proper documentation and accurate claims prevent issues during ATO audits. By keeping detailed records and having valid tax invoices, businesses can streamline the process of claiming GST credits and ensure compliance with GST regulations.

Thriday: Your partner in simplified GST reporting

In the digital age, managing your business finances, including GST reporting, should be as efficient as possible. This is where Thriday comes in. Thriday is a powerful AI-powered bookkeeping software designed to make your life easier, including when it comes to GST.

How Thriday streamlines GST reporting

• Automated calculations: Thriday automatically calculates your GST obligations based on your payroll data, eliminating the need for manual calculations and reducing the risk of errors.
• Seamless integration: Thriday integrates with popular accounting software, allowing you to easily import your GST data into your BAS.
• Real-time reporting: Thriday provides you with real-time insights into your GST liabilities, so you always know where you stand.
• Compliance made easy: Thriday ensures that your GST reporting is compliant with the latest ATO regulations, giving you peace of mind.

Who should consider Thriday?

Thriday is a valuable tool for any Australian business that wants to streamline its GST reporting process. Whether you're a small business owner with a limited budget or a larger enterprise looking for a more efficient solution, Thriday can help.

If you're looking for a way to simplify your GST reporting and free up your time, Thriday is worth considering. With its user-friendly interface, powerful features, and seamless integration, Thriday makes it easy to stay on top of your GST obligations.

Frequently asked questions

How often do I need to lodge my BAS?

Your BAS lodging frequency depends on your GST turnover:

• Monthly: GST turnover of $20 million or more
• Quarterly: GST turnover between $10 million and $20 million
• Annually: GST turnover under $10 million

To find out when to lodge your BAS, check the key dates here.

What exactly do I need to report on my BAS?

The information required varies depending on your reporting method:

• Simpler BAS: Total sales, GST on sales, GST on purchases.
• GST Instalment Method: Total sales, GST on sales, GST on purchases, GST instalment amounts.
• Full Reporting Method: More detailed information, including export sales, capital purchases, etc.

Will I be penalised if I make a mistake on my BAS?

Yes, inaccurate or late lodgement of BAS can lead to penalties. It's crucial to report accurately and on time.

Can Thriday help me with my GST reporting?

Absolutely! Thriday automates GST calculations, integrates with accounting software, and ensures compliance. It's a great way to simplify GST reporting and reduce errors.

I'm still confused about GST. What should I do?

Don't worry! GST can be complex. Thriday offers personalized guidance and support to help you navigate GST compliance with ease.

Ready to simplify Your GST reporting?

Contact Thriday today to learn more about how their software can help you streamline your GST reporting and take the stress out of tax time.