If you are starting out in business and your turnover for 12 months is going to be above $60,000, then you will need to register for GST at the same time as you set your business up.
By “turnover”, we are talking about your total sales that you charge your customers or clients, not what is left after you take off the costs of running the business. Turnover equals sales.
If you’re not sure what your turnover is likely to be, this would be a great time to talk to your accountant about your plans and get some tailored advice specific to you and to get some assistance with the decision on whether to register for GST or not.
There’s a few things to consider before registering for GST, for example, if you are wanting to stay small and have a business as a side hustle or lifestyle change, registering for GST may not be appropriate.
In some cases, it can cause less drama and stress down the track if you register to start with. For example, if you are in a providing services to your customers and find that six months down the track, you are going to need to register for GST, this will mean changing your pricing to include GST, which would mean putting your prices up when you are new to business which sometimes can upset your customers and discourage them from continuing to trade with you. So that is something to keep in mind when you are thinking about the future of your business and whether you want to grow or stay small.
And I bet, if you talk to your mates at the pub, they will tell you “YES you should DEFINITELY register for GST so that you can get all the refunds from the costs of setting up”. Yes, that is true. But not every patron at the pub is an accountant or bookkeeper even though they might fancy that they have the skills of one after a few beers.
Registering for GST when you don’t have to, could cost you in the long run and you may look back later and wish you hadn’t registered because you may have got one good refund at the start and now you end up having to pay GST on every return after that. The GST loop is very easy to get into, however it’s not as easy to get out of if you want to deregister later on.
And just for the record, just because you decide to set up a company, doesn’t necessarily mean that you have to register for GST.
There is no substitute for making an informed decision with the help of an accountant and there are plenty of horror stories of the costly mistakes of registering for GST when you didn’t have to.
