. . . handle GST, with Paul Drum, of CPA Australia.
AS A small business owner, should you charge GST?
With less than $75,000 in annual turnover, you don't have to charge GST, giving you a kind of competitive advantage from a price point of view over those that do have to charge it.
However, many small businesses like to charge GST anyway because they intend getting bigger and do not want to have to raise prices, or they want to appear larger than they actually are.
If you're not charging GST, the market immediately knows you're very small, probably operating out of somebody's living room. It doesn't send a confident signal that you have the organisational backing to do whatever the client wants.
Also, some large businesses won't deal with you unless you're registered for GST because it's too difficult for them to deal with suppliers if some of them charge GST and some do not.
Large retailers might have tens of thousands of different line items, and it's complicated for them to be claiming back input tax credits on some suppliers and not on others.
Should you hold collected GST in a separate bank account?
No. Part of the beauty of collecting GST is that you actually have the use of that money until you have to pay it on. So if you're just sticking it into an old sock somewhere, I really question whether you're running your business properly because you should be using it to your advantage. Of course, you have to make sure you have the money when you need to pass it on to the Tax Office.
What's the best payment cycle?
If your turnover is $20 million or more, you have to pay monthly. If you're below, you can go quarterly. Very small companies can pay annually. The longer you have the use of the money the better. For most small businesses I would say quarterly or monthly is generally the way to go.
But it's important to remember that GST is not a tax on business, but on the ultimate consumer. In business, when you buy items and they have GST on them, you get a refund. So whether you lodge monthly, quarterly or annually might depend on how much your refunds are going to be. If you've got a lot of input tax credits to come back, you might want to be lodging more regularly.
Paul Drum is head of business and investment policy at CPA Australia.
Frequently Asked Questions about this Article…
Do I have to charge GST as a small business?
If your annual turnover is under $75,000 you don't have to charge GST, but many small businesses choose to register voluntarily so they don't have to raise prices later and to appear larger to customers.
What are the advantages of registering for GST even if I’m below the $75,000 threshold?
Voluntary GST registration can help you avoid having to increase prices as you grow, make your business look more established, and let you qualify to supply large businesses that may only deal with GST‑registered suppliers.
Will not charging GST make my business look too small to potential clients?
Yes — not charging GST can signal to the market that you're a very small operation, which might discourage some clients; some larger companies also prefer dealing only with GST‑registered suppliers for ease of accounting.
Should I keep GST I collect in a separate bank account?
No — you don't have to hold collected GST in a separate account. You can use the money until it's due, but you must make sure the funds are available when it’s time to pay the Tax Office.
How often do I need to lodge and pay GST?
If your turnover is $20 million or more you must lodge monthly. Businesses below that threshold can generally lodge quarterly, and very small companies can lodge annually. Most small businesses find quarterly or monthly reporting works best.
Is GST a tax on my business or my customers?
GST is a tax on the final consumer. Businesses charge GST to customers but can claim back GST paid on their purchases as input tax credits, so the net effect is borne by the end consumer.
Should I lodge GST more often if I have a lot of input tax credits?
Yes — if you expect significant input tax credit refunds, lodging more regularly (for example monthly instead of quarterly) can get refunds back to you sooner and improve cashflow.
Who is giving this GST advice and where does it come from?
The guidance in the article comes from Paul Drum, head of business and investment policy at CPA Australia, who explains practical GST rules and considerations for small businesses.
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