Accounting For You

Accounting and Bookkeeping for Small Businesses and Sole Traders

Chartered Management Accountant, Certified Practising Accountant

and Registered Tax Agent

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Should your business register for GST?

Posted on 30 March, 2014 at 2:18 Comments comments (99)
When it comes to registering for GST there may or may not be an option. Once your business turnover reaches a certain value, or is anticipated to reach a certain value within the next twelve months, there is no longer an option, registering becomes compulsory.

In New Zealand the mandatory threshold is $60,000 and in Australia it is $75,000. If your turnover (total sales) is less than these mandatory figures then registering for GST becomes optional.

So are there any benefits to registering for GST before you have to?

Well, to answer that first we should look at what you have to do if you are registered for GST.

  • You have to charge GST on all your sales (15% in NZ, 10% in Australia)
  • You have to complete regular GST Returns.

The timing of how often you need to complete GST Returns can vary. In New Zealand, if you only have a small turnover then you have three options, either monthly, bi-monthly (which is the most common), or six monthly. In Australia the reporting options are monthly, quarterly (the most common), or annually.

Once you get used to completing GST Returns, and so long as you are keeping good records, completing the returns can be done easily and relatively quickly.

So is there a benefit to registering for GST before you need to?

There is one very big benefit to being registered for GST. Once you are registered for GST you can claim back all the GST that you have been charged on your purchases, and this includes GST on imports.

The big con to registering is of course the fact that you have to charge GST on all your sales thus increasing your sales price. This of course is not necessarily a con if all your sales are generally to businesses, since, if they are in turn registered, then they can claim back the GST you have charged them. It can however be a big con if your sales are to end users, the general public. How much of a con this would be would of course depend on how your final sales price comperes to those of your competitors selling the same or similar items.

Of course, the other thing that should be taken into consideration here is whether or not the majority of your sales are to overseas buyers. You don’t need to charge GST if you have goods that you are selling to overseas buyers.

So really at the end of the day you need to weigh up the pro (of being able to claim back GST charged) against the con (of having to increase your sales price by the GST) in order to determine whether it is beneficial to register for GST before you need to.

If the majority of your sales are to overseas buyers then there is a good chance that it would be beneficial to register for GST. If the majority of your sales are domestic then maybe not.