There’s a common myth in small business that it’s a waste of time and effort to register for goods and services tax (GST) before your business generates $75,000 in revenue each year. Here’s the truth behind that myth and why you might need to consider GST registration sooner than you think.

When you’re just starting out or coming through a tough patch in your business, earning $75,000 a year in revenue might seem like it’s a long way off. This is the threshold for registering for GST, when you’ll need to charge GST as part of your pricing and pay that to the ATO through your tax systems.

We asked our business adviser Brian Childs why it could be worth thinking about GST registration sooner rather than later – and here’s what he shared.

Some clients will need you to be registered

When you’re starting or growing your business, it’s important to have the flexibility and systems in place to work with a range of clients. According to Brian, to work with certain clients, you’ll need to be registered for GST as part of their standard supply agreement.

“GST registration is desirable when you’re quoting or tendering to government and large businesses. Certain accounting systems are designed around the assumption that all suppliers are GST registered. Your business could be ineligible to work with some organisations simply because their accounting systems can’t cope with a non-GST supply.”

Being registered for GST could boost your image

The brand of your business is not just your logo, website and marketing materials. Your brand extends to your products and services, your interactions with clients and even seemingly small details such as being registered for GST.

“GST registration may project an image of an established business which is reliable and sound. Often businesses that are not registered for the GST may appear to be very new and may give the impression of being financially fragile,” says Brian.

“When your client learns you are not registered for GST, they could assume your business is not established and that you could be unreliable.”

Photo of SBDC Business Adviser Brian Childs sitting at his desk in the SBDC's office in the Perth CBD.
SBDC Business Adviser Brian Childs.

Registration for GST can help your business systems

Some business owners postpone registering for GST to avoid completing regular Business Activity Statements (BAS). Brian recommends engaging an accountant for professional advice for your situation and to help you put the right systems in place.

He says preparing for BAS can take up to an hour each week but this can give you a clear indication of the health of your business.

“GST registration can help you to work with your accountant to develop and install a suitable record system in order to prepare your regular BAS. The act of preparing and reviewing BAS reveals how your business is performing and can help with decisions on matters such as pricing and costs.”

Your accountant can deregister your business from GST if necessary

If your revenue drops below $75,000 annually on an ongoing basis, deregistration of GST status is a straightforward process for your accountant to handle if necessary.

“Your accountant is best placed to steer this with the ATO on your behalf,” recommends Brian.

“Consider deregistration under advice and only after a full review of current circumstances and the outlook for your business. You would want a full health check across all circumstances before rushing to deregister for GST.”

More information

With GST and all other aspects of business, it’s important to keep learning and work with trusted advisers to understand more. Brian recommends that every business owner keep informed about the financial dynamics that affect business and personal life, even if you don’t think they will affect your immediate future.

To discuss an issue facing your business, you might like to book an appointment with our free business advisory service or call 133 140 to speak to our experienced team members.

Starting and growing
31 March 2023