Does the idea of registering for GST give you the heeby jeebies? It did for me too, until I realised that it’s actually beneficial to the perception of my brand. I was of the mindset that it was all too much work, so why do it before it was absolutely necessary? I was completely wrong! To help stop you making the same mistake I did, I’ve invited Accountant Kelly Ho to explain how registering for GST can help your brand positioning. Not sure? Trust me… you’ll want to read this!
Enjoy! Rachel x
How registering for GST can help your brand positioning
Whether you are a new business start-up or one that is well established, GST (which stands for Goods and Services Tax) can be a scary acronym! Don’t let it scare you! Believe it or not, you can use it to play a part in your brand message and positioning, especially during the start-up stage.
What is GST?
GST is a 10% tax that is charged on most goods and services – this 10% is collected/charged by the business owner, who is then responsible for passing this onto the government at the end of each quarter (or month depending on the size of the business).
How do you charge/pay GST?
Business owners need to work out their sale/charge out price, then add an additional 10% onto it. When the customer pays for the goods and services, they also pay the extra 10% which is the GST.
At the end of each quarter, business owners report the GST collected on a form called a BAS (Business Activity Statement). This form can be prepared online now, and once lodged, you receive payment details to transfer the GST collected through to the ATO.
Who needs to register for GST?
It is really important to know that business owners need to opt in (register) for GST. Yes! Sorry – another step on top of registering for an ABN, Tax File Numbers and Business Name.
Not all businesses need to opt in, but the general rule for most is that if your turnover is above $75,000 in a 12 month period, you MUST register. (Disclaimer: Of course, as with most tax laws, there are some exceptions relating to specific industries – some have to register no matter what, and some get a higher threshold (check with your advisor if unsure).
It is pretty important to keep track of your sales/income. IF you do go over and you haven’t registered, the ATO will most likely deem you as having been registered and take 10% of what you have earned anyway – so this comes straight out of your own pocket since you have not had the chance to add the 10% to invoices. It will become pretty obvious once your tax return is lodged what your sales/turnover is for the year so it is much easier to plan for GST than to ignore it until it is too late
Why would you choose to register anyway?!?!?! 😱
So you’re thinking, “I won’t be earning $75,000 so why would I bother registering? This will make life so much easier!”. Some businesses choose to register for GST at start-up phase even if the expected turnover might fall below $75,000.
If not registered for GST – businesses are required to clearly mark this on their invoice with a note such as “Total does not include GST” or “Not registered for GST”. This sends a clear message to clients/customers that the business they are dealing with does not earn more than $75,000. If you are trying to win work with larger more established clients, you may want to come across as a serious business and not a start-up trying to earn their first $75,000.
Once you register for GST- you must provide a valid tax invoice to your customers which contain certain information as set by the ATO (1).
Getting the format of your invoice correct is essential – More about invoicing and how that is an extension of your brand messaging in the next post 😊
Quick Tips to master GST
- Once you have registered for GST, you also can claim a credit in the BAS for any GST paid on goods and services! This is an all in approach – you need to CHARGE and CLAIM – you can’t have your cake and eat it too! Some savvy business owners have asked if they can just claim the credit and not bother about charging… and the answer is No!
- But there is a catch, to claim the GST paid, you must have good receipt keeping records – the current threshold for keeping receipts is anything above $82.50 (2). (Note this has been known to change so it is advisable to check annually). There are many great innovative apps on the market to help with receipt management and they have some pretty cool features like linking straight to accounting ledgers. Gone are the days of the messy shoebox full of receipts in the bottom drawer!
- Don’t be scared about the record keeping! There are some very affordable cloud based accounting software options which make this quite easy – managing this yourself can cut down costs – just get a professional to check your set up, provide some basic training and a review quarterly prior to lodgement.
- Cashflow management is KEY when it comes to GST – essentially the business is getting an additional 10% in their bank accounts with a lump sum outlay to be made at the end of each quarter. We all know how easy it is to spend money in the bank once it is in there.
Hopscotch Chief Financial Advisor’s (aka Mr Hopscotch) top take away tips from KAS’ blog!
- The threshold for GST registration takes place over a rolling 12 month period, not a financial year. Don’t get caught out, and register early to avoid paying from your own pocket! Scomo gets enough from us as it is!
- When a client or customer deals with a business, being registered for GST is almost expected. If you’re not, it may raise questions about the validity or strength of your brand/business. This could lead to reduced trust and higher perceived risk. It is certainly something to consider in the overall positioning and growth of your brand.
- DON’T spend money that doesn’t belong to you. Set up your bank accounts accordingly to keep your GST payments separate from your working accounts.
- Technology is your friend! As Kelly says, there is some great accounting software out there…and they do all the hard work for you. Spending a few dollars each month will reduce your time doing maths…and let’s face it, no one loves maths (well, except Kelly and me perhaps)! This will give you more time to focus on your business and doing what you love!
BONUS: Kelly is offering a free initial consultation to all Hopscotch Branding Studio subscribers. Pop your details in below and then email email@example.com to book a time.
Find her here:
Linked In: Kelly Ho
More about Kelly Ho:
Kelly started Komplete Accounting Solutions (KAS) in 2016. The company provides bookkeeping and CFO services to small to medium sized businesses. Her focus is on helping businesses maintain the balance between practicality and flexibility, whilst ensuring compliance with the ATO!
Kelly’s strategic and forward-thinking guidance is invaluable to growing businesses and she is able to jump in as and when required!
Kelly is known to be a bit of a coffee snob (lucky she lives in Melbourne) and loves to chill out at a local café with a good book in hand.