What counts towards the $75,000 GST threshold?

Gross sales, not profit and not income

The first misconception to clear up is that GST turnover has nothing to do with how much money you make. ATO: Registering for GST defines it as your total business income, not your profit. A business turning over $80,000 with $70,000 of expenses is over the threshold and must register. A business turning over $60,000 with almost no expenses is under it and need not. Profit is a completely separate question, and the GST registration threshold asks only about the size of your sales.

The two tests

Registration is triggered if either of two measurements reaches $75,000:

• Current GST turnover — this month plus the previous 11 months. This is the one that catches sole traders who had a genuinely busy year and did not notice until the total was already past the line.
• Projected GST turnover — this month plus the next 11 months, based on what you reasonably expect to sell. This is the one that applies when you have just signed a contract that will clearly take you over, even though your last 12 months are comfortably under.

You have 21 days to register once either test is met, as set out in the ATO's registration rules. The projected test is not optional: if the work is booked and the money is coming, the honest answer to "will I exceed $75,000 this year?" is yes, and the registration should follow. There is a limit on it in the other direction, though — the ATO says that even where your current turnover is at or above the threshold, you do not have to register if it is satisfied that your projected turnover will be less than the threshold.

What is included

Broadly, everything you sell in the course of the business counts towards turnover — including sales that carry no GST:

• GST-free sales. Most basic food, many health services and some education services carry no GST, but they still count towards the threshold. This is the detail that catches health practitioners and food businesses.
• Sales to overseas customers, where the sale is connected with Australia.
• Cash jobs. How you were paid makes no difference. Cash is turnover.

What is left out

The ATO sets out the five amounts subtracted from total business income to arrive at GST turnover:

• The GST you charged. If you invoiced $110 including GST, the turnover value is $100 — the tax is not your sale.
• Sales to associates that aren't for payment and aren't taxable sales.
• Input-taxed sales — including residential rent and some financial supplies, where no GST is charged and no GST credits are available.
• Sales not connected with an enterprise you run — selling your own car or your home, rather than business stock.
• Sales not connected with Australia.

There are further exclusions specific to the projected test: amounts received for the sale of a business asset such as a capital asset, and any sale made solely because the business is ceasing or substantially and permanently shrinking, are disregarded when you project forward. The point of that rule is to stop a one-off asset sale from dragging a business over the threshold.

Why this is the question that matters most

Almost every other GST decision depends on this one. Whether you can claim GST credits, how you price, how often you lodge a BAS and whether your invoices have to be tax invoices all follow from being registered. And the cost of getting it wrong runs in one direction: if you should have been registered and were not, the GST on those sales can be payable from the date registration was required, plus interest and penalties on top.

Two habits make the threshold manageable. Track it monthly, so a rolling 12-month figure is never a surprise. And decide the projected number honestly — if you are deliberately keeping your forecast under $75,000 to avoid registering, keep the evidence, because you may have to justify it later.

Once you know which of your sales are taxable, the arithmetic of any invoice is straightforward: the GST calculator will split a total into the amount that is GST and the amount that is yours. How to register for GST in Australia covers what happens next, and ATO: How GST works explains how the tax works once you are in the system. When you are ready to make the application, business.gov.au: Register for goods and services tax (GST) walks through the registration itself.