How to register for GST in Australia

When registration stops being optional

The rule is set out in ATO: Registering for GST: you have to register if your GST turnover is $75,000 or more, or $150,000 or more for a non-profit organisation. There are a few situations where the threshold does not save you:

• Taxi, limousine and ride-sourcing travel. You must register from your first payment, whatever your turnover, because the threshold does not apply to that work.
• You want fuel tax credits. You have to be registered for GST to claim them.
• You are starting out and expect to cross the line. If you are about to start a new business and expect turnover to reach the threshold in your first year, the ATO expects you to register from the start rather than wait and backdate it.

Once you cross the threshold you have 21 days to register — and if you miss that window, the GST you should have charged can be payable from the date you were required to register, not from the date you finally got around to it, plus penalties and interest. That is the part that catches people out, because the money was never collected from customers in the first place. The ATO's registration page also notes that a backdated registration is limited to four years.

What "GST turnover" actually means

GST turnover is not profit and it is not the same as your taxable income. The ATO's own definition, on that same page, is your total business income — not your profit — minus the GST included in your sales, sales to associates that are not for payment, sales not connected with an enterprise you run, input-taxed sales, and sales not connected with Australia. Sales that are GST-free are not subtracted, which is why they still count towards the threshold.

The ATO measures turnover over a rolling 12-month window in two ways:

• Current GST turnover — this month plus the previous 11 months.
• Projected GST turnover — this month plus the next 11 months, on what you reasonably expect to sell.

You have to register if either test reaches $75,000. If your past 12 months are under the threshold but you have just signed contracts that will clearly take you over it, the projected test is the one that matters. There is also a relief built into the other direction: even where your current turnover is at or above the threshold, the ATO says you do not have to register if it is satisfied your projected turnover will stay below it.

You need an ABN before you can register

GST registration sits on top of an ABN, so if you are a sole trader starting out you apply for the ABN first — it is free through the Australian Business Register — and then add GST to the same registration. business.gov.au: Register for goods and services tax (GST) covers both steps. If you are paid by customers before you have an ABN, you will also notice their withholding obligations kick in, which is the practical reason most people sort the ABN out before their first invoice rather than after.

How to actually register

There are four routes, and none of them is expensive:

1. Online through ATO Online services for business, if you already have an ABN and an account.
2. By phone on the ATO's business line, 13 28 66.
3. Through your registered tax agent or BAS agent, who can also set your reporting cycle up correctly from day one.
4. On paper with the "Add a new business account" form, if you prefer.

You will be asked whether you want to report quarterly or monthly, and whether you will account for GST on a cash or accruals basis. Cash accounting — GST recognised when you are paid — is available to small businesses and is usually the friendlier option for a sole trader with uneven income.

What changes once you are registered

From the registration date you charge 10% GST on your taxable sales. The rate has been 10% since GST began on 1 July 2000, as ATO: How GST works explains. Three things follow:

• Your invoices become tax invoices and have to carry your ABN and the GST amount.
• You lodge a BAS each reporting period, paying the GST you collected and claiming back the GST you were charged on business purchases.
• Your prices effectively rise by 10% unless you absorb the GST — a pricing decision, and worth checking against what your competitors charge.

Keep the two movements separate in your head. GST you collect is not your income; it is money you are holding for the ATO. GST you are charged on a business purchase is usually claimable back as a credit, which is why being registered is often worthwhile even when it is not compulsory.

Voluntary registration, and getting it right

You can register before you reach $75,000 — some sole traders do it to claim GST credits on equipment, or because their customers are other businesses that expect a tax invoice. The trade-off is real: you take on the charging, the invoicing and the BAS lodgments from that point, and if your customers are consumers, the 10% usually comes out of your margin.

Two habits make registration painless. First, keep the GST portion of every sale visibly separate in your records from the moment you register, so your BAS is arithmetic rather than archaeology. Second, check the threshold every month rather than once a year — the 21-day clock starts from the day you go over, and a rolling 12-month window means it can happen quietly in a busy quarter.

If you are not sure whether a particular sale is taxable, GST-free or input-taxed, that is a question for the ATO or your accountant. The GST calculator will do the arithmetic on any figure you give it; it cannot tell you whether the figure is taxable.

Once you are registered, the next deadlines to get your head around are the BAS dates — When is my BAS due? walks through them.