What Happens To Non-GST Registered Businesses?

Goods and Services Tax (GST) is usually part and parcel of running a business. However, there is one lingering question that most business owners often ask: does my business need to register for GST?

A business with an annual turnover of $75,000 or more needs to register for GST and if it is less than that, you can choose to not register. The registration must be made within 21 days.

For ride-sharing drivers and taxi drivers, GST registration will be required regardless of the annual turnover. On the other hand, non-profit organisations have the option to not register even if they reach up to $150,000 turnover.

The registration process can be done online via Australian Business Register (ABR) website. The ATO website also provides you an option to register for GST.

The Implication of GST Registration

If you are going to register for GST, there will be an additional 10% charge which should be paid to the ATO. For example, if you charge $50 for your goods or services, the customer will be charged $55. You pay the additional $5 to the ATO.

If you make a purchase of business supplies, you will also be charged 10% in GST. This can be claimed back as a credit. It is important to note that you need to account for the GST, you have collected on your sales, minus the credits on your purchases. Your transactions must reflect on a business activity statement.

If your business has a turnover of less than $75,000, you will given a choice of registering for GST. This is applicable for business spending extensively on supplies. This enables the business to claim the GST credits back.

What happens to non-GST registered businesses?

Businesses that are not required to register for GST should not collect GST on sales or claim GST credits on the goods that have been purchased. Since you have not registered for GST, your business should only issue normal invoices. Unlike invoices issued by GST registered businesses, normal invoices do not include tax invoice. It does not also indicate that the invoiced amount includes GST.

As a non-GST registered business, you can also claim the full cost of your business purchases. This already includes any GST. It will be a tax deduction on your income tax return.

You cannot claim a GST credit if you receive an invoice for goods or services you have purchased from a non-GST registered business. This is because the invoice will not be considered a tax invoice.

About the Author Peter Broberg

Peter Broberg is a bookkeeping professional with over 20 years experience in the finance sector. With more than 2 decades of experience, Peter provides payroll and bookkeeping services on a professional level. His services cater to small and medium enterprises in Cannington, Kalamunda.

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4 comments

john ng says April 21, 2021

I’m desperate to find info on what happens on the paying side. I called the ATO but the person was not sure, he said that if I’m not registered for GST (only 20-30K per year) then the paying company/person needs to hold 47% back of the payment, i.e. essentially I only get paid 63% of my invoice, If I submit a ‘regular invoice’. I can find any information on the payer side if I’m not GST registered.

Peter Broberg says April 21, 2021

Hi John,
Thanks for your comments.
Not being registered for GST does not mean the payer has to withdraw 47% of payment of your invoice. This only applies if you don’t have an ABN or don’t supply a valid invoice with the required information.

So if you do have an ABN and provide a valid invoice to your payer then they must pay 100% of the invoice.

Feel free to contact me if you would like to discuss this further

Kind regards
Peter Broberg

KJ says September 8, 2021

I’m a sole trader with an ABN, not registered for GST as my turnover will be less than $75k. I have a few questions as I’m very new to this, sorry!
1) If I issue a ‘tax invoice’ with no GST, is this acceptable, or do I need to remove the ‘tax’ from my invoice template?
2) When claiming business expenses, I’m entering the full cost and using the ‘BAS excluded’ tax code – Is this correct?
3) I also have a full time job, so will my business earnings impact PAYG? If so, can I pay PAYG from my business to ensure I don’t have a tax bill at EOFY and how would I record that if I don’t have wages?
Thanks in advance for your help!

Peter Broberg says September 8, 2021

Hi,

Thanks for your comments

Sounds like you are using Xero. When issue a invoice and you are not registered for GST you can simply remove the word Tax in the invoice template. You should also comment in the footer that you are not registered or the price doe not include GST.

When claiming business expenses youe enter the full cost of the spend money or bill and use BAS Excluded as you have mentioned

Your income for the business will be added to the income you have earned from full-time job. If you are concerned that you have not put aside enough PAYG Tax then send money to ATO to allow for this.

The Payment details should be in your MYGOV account.

Hope this answers your questions

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