There are many decisions that starting a new business entails and one of which is whether you register for GST. There are businesses that automatically register for GST, but some businesses are not aware that registration is optional. However, for businesses with annual turnover of $75,000 or more, GST registration will be mandatory. For turnover less than this, GST registration will be optional. The option to register will depend on cash flow and administrative implications of your decision.
The cash flow implications if you decide to not register for GST would mean selling prices will be effectively 10% cheaper than the registered competitors for a turnover below the $75,000 threshold. You can also charge the same price as your competitor to enjoy a healthier profit margin. You also have to keep in mind that there are businesses that may not be sure about buying from those that have not registered for GST because of deeming their credibility questionable. This will also affect your sales. Some businesses prefer to purchase from businesses that have registered for GST as a way of claiming the GST back.
You also have to take the administrative requirements into consideration because GST registration means additional administration work. You will also have to report to the ATO on a quarterly basis. There are two distinct roles you need to remember once you have registered your business: the running of the business and acting as a tax collector for the ATO.
Registering for GST
You will need an Australian Business Number (ABN) when registering for GST and it can be done in three ways: online via Business Portal, by phone and through your registered BAS agent or tax agent. You will be notified in writing of your registration details once you complete the registration process. It will also include the date your registration is effective.
Cancelling your GST registration
When you decide to close or sell your business, you need to cancel your registration within 21 days. Cancellation of GST registration is also necessary if your business structure changes. An example of this is when you change your business from partnership to a company.
YOu may also cancel your GST registration if your GST turnover is below the compulsory registration threshold, unless you:
> are an Australian resident who serves as an agent for a non-resident that is required to be registered or registered for GST;
>are a taxi driver;
>represent an individual who is registered or bankrupt;
>are a business that is in liquidation or is registered for GST