The Australian GST system can appear to be quite complicated for some small businesses just starting out, due to the different types of GST goods and services, such as input taxed, GST-free and GST taxable.
Input taxed items are commonly financial services or products and rent from residential property.
GST-free items are goods and services provided as a part of education, medical and health services, and unprocessed food and produce.
Goods or services that are not classified as input taxed or GST-free are considered to be taxable. These products or services must have GST included in their selling price if the business selling them is registered for GST.
A determining factor of whether a business should register for GST is whether or not they can pass on the GST in the price they charge, or whether their industry’s market determines their product price, meaning GST cannot be added to the price.
Another factor businesses need to consider is whether they are able to increase their selling price to include GST. Businesses who cannot increase price effectively lose one-eleventh of the selling price (which must be paid to the ATO).
Businesses that turnover less than $75,000 a year are not required to register for GST. These businesses receive an Instalment Activity Statement, rather than a Business Activity Statement, from the ATO that advises them of their PAYG tax instalments. The IAS also must have completed the details of amounts paid to employees and how much has been deducted as PAYG withholding tax.