When it comes to tax compliance, one area where you need to ensure that you are on top of your financial games is GST.
GST, which is short for Goods and Services Tax, can be described as a broad-based tax of 10% on goods, services or other items that are sold or consumed.
Also, if you earn more than $75,000 annually in GST turnover, you are required by law to be registered for GST.
So, is GST difficult to manage as part of your business’s financial portfolio? Not at all!
In today’s blog, we will be looking at GST tips and tricks that every small business owner should know – and that will definitely assist in helping you navigate this tax requirement to the best of your abilities.
Let’s start with certainly one of the most important considerations.
1. Ensure that you register for GST in time – and know when you should cancel too
Once you are approaching the threshold of needing to register your business for GST, it is important that you do not delay. If you register too late, you could be liable for GST that would have otherwise been paid by your customers – as well as penalties and fees. However, registering too soon can also not count in your favour, as you could incur extra costs if your customers aren’t registered for GST.
On the other hand, it is important that you deregister for GST in time, such as when you decide to retire or if you plan to scale down your business. A good point to remember here is that you might be liable for repaying GST Credits for business assets that you wish to retain.
Always check with your accountant regarding whether you are liable to register for GST, or what the steps are when you plan to deregister.
2. Know the difference between appreciating and depreciating assets
A good rule of thumb is to preferably claim GST on depreciating assets, rather than appreciating assets. Depreciating assets could include your work vehicles or other equipment, while appreciating assets could be any asset of which the value increases over time, such as real estate. Real estate is always a good investment, of course, but when it comes to GST, it is best to check with a professional whether you should consider claiming GST and if it will benefit you in future or not.
3. Do not claim GST Credits on private expenses
Examples of private expenses include food and entertainment, and it is important that you do not claim for these payments that are not business-related. Also, remember that if you use an item for business and personal use, only claim for the business portion.
4. Bear in mind how you should claim GST Credits for discounted purchases
Even if the discounted price of a purchase doesn’t reflect on your invoice, you need to only include your reduced price when claiming GST credits. Do not include the original price if what you paid is less than that.
5. Keep your records in check – including when you bought second-hand items
As with all your other financial statements, it is important that you maintain a good record of all your business purchases where GST would be related too, as this will it easier to claim for Credits. Do bear in mind: in certain instances, you can claim GST for second-hand goods purchased. If you do not have tax invoices for such purchases, do keep records of names and addresses from where you bought these items.
When it comes to your GST responsibilities, it is always a good idea to consult with a professional to ensure that you are on the right track. This will ensure that you follow the correct course of action when filing and claiming, and that you feel confident throughout the process.
Need more advice on GST? We would be happy to assist – contact us today and we will be in touch!