GST Registration Threshold in Australia: When to Register

The GST registration threshold in Australia is $75,000, and the number is the easy part. What catches people is the counting. It runs on gross income rather than profit, and it uses a rolling 12 months that moves every month rather than the financial year.

Miss the moment you cross it and the problem is not really the penalty. If you were required to register and did not, you may have to pay GST on sales made since the date registration was required, even on the ones where you never added GST to the price. Penalties and interest can come on top. That money arrived without GST in it, it has since been spent, and the liability is still yours. You get 21 days from the point you are required to register.

This guide covers how the threshold is counted, what happens on either side of it, and when crossing it does not mean registering at all.

The threshold, and the 21 days

You must register for GST when your business has a GST turnover of $75,000 or more. For a non-profit organisation the threshold is $150,000. Once you are required to register, you have 21 days to do it.

Turnover is not the only trigger. You have to register regardless of what you turn over if:

• You provide taxi or limousine travel for passengers, including ride-sourcing. This covers owner-drivers and anyone leasing or renting a taxi, and it applies from the first dollar.
• You want to claim fuel tax credits for your business.
• You are starting a new business and expect to reach the threshold in your first year of operation.

Two mechanics catch people out early. You need an ABN before you can register, so a brand new business gets the ABN first and the GST registration second. And you only register once, however many businesses you run under that ABN, because registration attaches to you rather than to a trading name.

Registering is what puts an activity statement in your calendar. If you have never dealt with one, what a BAS actually is is the shape of what follows.

GST turnover is not your profit, and not the financial year

GST turnover is your total business income, before expenses, minus a short list of specific exclusions. Expenses never enter the calculation. A sole trader turning over $90,000 and taking home $30,000 after costs is over the threshold, because the $90,000 is the number being tested.

What the ATO takes out of the figure is narrow:

• The GST included in sales to your customers.
• Sales to associates that are not for payment and are not taxable.
• Sales not connected with an enterprise you run.
• Input-taxed sales you make.
• Sales not connected with Australia.

GST-free sales are not on that list, which is the exclusion people assume exists. The ATO’s list of GST-free sales covers most basic food, and some education courses, medical and health services, childcare and medicines, and every dollar of them still counts towards your $75,000. A business selling nothing but GST-free goods can be required to register and then lodge activity statements reporting no GST payable at all.

The other half of the definition is the period. It is not the financial year. It is 12 months that roll forward every month, so a huge January is still in your count the following December and drops out only in the January after that.

The two tests, and the one that lets you off

There are two ways to measure your GST turnover, and you check both.

Your current GST turnover is the current month plus the previous 11. It is a backward-looking number and you can calculate it exactly from your invoices. Your projected GST turnover is the current month plus the next 11. It is what you reasonably expect from here, so it is a judgement rather than a total.

Either one reaching $75,000 means you are required to register. That is where most explanations stop, and it is where they cost people money, because the ATO’s own guidance on registering for GST carries a second sentence: “Even if your current GST turnover is at or above the threshold, you don’t have to register for GST if your projected GST turnover will be less than the threshold.”

One abnormal year does not lock you in. The question that decides it is what the next 12 months look like from where you are standing.

Two things stay out of the projected figure specifically. Proceeds from selling a business asset, such as a capital asset, do not count. Neither does any sale you make solely because you are ceasing the enterprise or substantially and permanently reducing its size. Selling the ute, the excavator or the business itself does not push you over the line.

Here is how that plays out. A sole trader carpenter turns over about $55,000 a year on domestic work. In October she invoices a single commercial fit-out at $30,000. Her current GST turnover at the end of that month is $85,000, well over the threshold. Her projected turnover for the next 12 months, with the fit-out finished and domestic work back at the usual rate, is about $57,000. Under the ATO’s test she is not required to register, and registering anyway would cost her four activity statements a year, $600 of BAS lodgements at our fee, and a 10% rise on every domestic quote. What she does instead is keep the calculation and redo it each month. The same reader usually has a second question about what else that job can be claimed against, which is where tradie tax deductions comes in.

The qualification matters. “Reasonably expect” means a calculation you could show someone, not optimism. If the fit-out turns into three more, the projected test flips, and the 21 days start from the month it flips rather than from whenever the invoices are eventually reconciled.

What happens if you register late

If you do not register when you are required to, you may have to pay GST on sales made since the date you were required to register. That applies even where you did not include GST in the price of those sales. Penalties and interest may apply on top.

That is the whole shape of it, and the ATO publishes no penalty figure for late registration, so treat anyone quoting one with suspicion. The real damage is the GST itself. On sales you priced without GST, the tax comes out of margin you have already spent, and it can run back months.

Backdating is possible and it has a limit. A GST registration cannot be backdated by more than four years unless there is fraud or evasion, and the flip side is the part usually left out: before that date, you are not required to be registered. Backdating is arranged by phone rather than through the online services.

If you work out that you crossed the line months ago, the useful move is to fix the date first. Work out which month you were required to register, register from that date, and get advice on the period behind you. Registering from today and saying nothing about the gap leaves the exposure in place.

Registering voluntarily below $75,000

Registering below the threshold is optional, with one condition attached: if you choose to register, you generally have to stay registered for at least 12 months. It is a 12-month decision, not a monthly one.

Whether it helps comes down to a single question, which is who your customers are.

The costs are the part that rarely gets mentioned. Registration brings four activity statements a year, the bookkeeping that has to be good enough to support them, and a higher tier of accounting work because the return now has to reconcile with what you lodged through the year. Our quarterly BAS lodgement is $150 per lodgement where the accounts are reconciled and the work is GST only, so four quarters is $600 a year before anything else. A sole trader return is $440 once you are registered rather than $330, the difference being the reconciliation of the year’s activity statements to the return, which is set out in what a sole trader accountant costs.

Voluntary registration is not a maturity signal or a growth milestone. It is arithmetic about your customer base and your input costs.

What changes the day you register

Registration turns on a set of obligations at once. From the date your registration takes effect, this is the list.

• Include GST in the price of your taxable sales, at the rate of 10%
• Work out which of your sales are taxable rather than GST-free or input-taxed
• Issue tax invoices for your taxable sales, and obtain them for your business purchases
• Claim GST credits for the GST included in the price of things you buy for the business
• Account for GST on either a cash or non-cash basis
• Put aside the GST you collect so you can pay it when it is due
• Lodge activity statements reporting your sales and purchases

The one that decides whether GST is routine or painful is the sixth. The GST you collect was never your income. It arrived in your account, it belongs to the ATO, and the businesses that end up on payment plans are usually the ones that spent it in between. A separate account and a transfer with every invoice is the whole technique.

Most small businesses lodge quarterly, and the BAS due dates fall four times a year after each quarter ends. Under $10 million of turnover you also report on Simpler BAS, which is three labels rather than the full form. If you would rather it was somebody else’s Thursday night, our BAS lodgement service is a fixed fee per lodgement.

The rate itself is the ATO’s broad-based tax of 10% on most goods, services and other items sold or consumed in Australia. Working out which of your own sales are taxable, GST-free or input-taxed is a separate exercise, and it is worth doing properly before your first statement rather than after it.

If your turnover drops, or the business stops

Falling below $75,000 does not cancel anything. Your registration stays live until you cancel it, and while it is live you keep charging GST and keep lodging, whatever your turnover has done.

You can choose to cancel once your GST turnover is below the threshold for compulsory registration. Three groups cannot: taxi, ride-sourcing and chauffeur drivers, anyone representing an incapacitated entity that is registered or required to be, and Australian residents acting as agent for a registered non-resident.

Cancelling is also compulsory in some situations, within 21 days of selling the business, closing it, or changing its structure, which includes moving from a partnership to a company unless the old business carries on something else. Where the business has genuinely gone, the ABN is cancelled within 28 days as well. A company registered with ASIC that has stopped trading can keep its ABN but still has to cancel the GST registration.

The date you nominate is the part to get right. The rules on cancelling a GST registration set three limits on it:

• The date you choose should be the last day you want to be registered, and the ATO usually cancels from the date you choose.
• You cannot cancel retrospectively if you were still operating on a GST-registered basis after the date you chose.
• You cannot cancel at all once you have lodged an activity statement for the period containing the cancellation date.

Cancelling GST also cancels any fuel tax credit, luxury car tax and wine equalisation tax registrations automatically. Activity statements keep coming if you are registered for PAYG withholding, have entered PAYG instalments, or have fringe benefits tax obligations, so cancelling GST does not necessarily end the paperwork.