Deregistering For GST Two Years In?

[davey]

I have a small second hand business that makes under $75,000 per year. We have our accountant look after all of our bookwork, which obviously costs us a lot of money. Recently there was a change of staff and the new person in the office asked if we need to be paying GST.

We have been paying GST each quarter, which is great, but it seems that maybe we don't really need to be registered to pay. I expect in the current economic climate, it may be a few more years before our business makes over the 75k.

As we only sell second hand goods, everything we buy has no GST, I know the accountants have been applying GST to all our sales, so we get a big bill each quarter, and that is really hurting us (as well as the accountants fees) as a small business.


Could it be appropriate for us to deregister? What are the main pros and cons. I will be having a more serious discussion with our accountant after this quarters lodgment, but just wanted to get some insight and suggestions before then. Thank you all!

[taxpert]

Hi Davey,

It's been some time since I've dealt with the issue of GST on second hand goods so I'm a little rusty but I'm sure there are some situations where a business which buys second hand goods for resale can claim a notional input tax credit even though the second hand goods they buy have no GST.

Take a look at this document from the ATO, it may be that your accountant hasn't claimed credits you were entitled to.

http://www.ato.gov.au/content/downlo...0817082011.pdf

If you have any questions after reading it don't hesitate to ask.

Cheers,
Simon

[KarenC]

I would also have a chat with someone in the ATO about business and GST. See ato.gov.au phone 13 28 66.

[bluepenguin]

You turn over less than $75,000 year in a retail business, and can afford to pay staff? Are you sure your numbers are correct?

[interAccounts]

Hi Davey,

Taxpert got it right with claiming notional GST on certain purchases. The link he included is a must read for you to ensure your Accountant is doing the right thing for you. It is possible to amend prior BAS already lodged with the ATO if errors were made.

If you decide to stop your GST registration, you will need to give the ATO a reason why you've decided to do so. The main reasons used are:

• Business has closed down / sold / never traded;
• Change of entity structure;
• Never operated on GST registered basis & turnover is less than GST Threshold; or
• Stopped operating on GST registered basis & turnover is less than GST registration threshold

The major pro with deregistering GST is that you no longer need to complete BAS each quarter. You'll still need to keep your bookkeeping up to date so you know where your business is heading.

Businesses would prefer to buy goods from GST registered entities so that the GST on their purchases are offset against their collected amounts - so if you decide to deregister from GST, then you may loose this type of customer (if you had them already).

It would be best to discuss this with your accountant as they know your specific details and therefore can give you the correct advice.

In relation to costs involved with your bookkeeping, check what hourly rate your accountants are charging you. Most accountants don't have a special bookkeeping rate and charge at the accounting/tax rate, so it may be cheaper to engage a dedicated bookkeeper. Some accountants may have bookkeeping as part of the services they offer (at bookkeeping rates not accounting/tax rates) - but we're a rare breed. From my research, bookkeeping rates vary between $50 - $80 per hour, depending on the experience / qualifications of the bookkeeper.

Hope this helps.

[KarenC]

Just a quick check - it's TURNOVER more than $75K not net profit over $75K. Any business with turnover more than $75K must have GST.

As mentioned before, many businesses prefer tax invoices with GST both to show you are a bonafide business and for their paperwork and deductions.

[Rhys]

Hi Davey,

Can you clarify please if the amount you sell in a year is less than $75k? Because if it is it may well be worth you deregistering, depending on a few factors, but no point spending time writing as detailed reply if we're at cross purposes - for example if you are talking about $75 net profit.

cheers, Rhys

[davey]

Thank you all for replying - very appreciated.

Firstly, bluepenguin, me type bad English. My business partner and I have no staff - the staff member mentioned in my post is my accountant's new staff member.

We are definitely turning over under $75,000 net each year. We started off quite well, but the retail down turn has affected us in the most recent of months.

Lots for me to read, and absorb. Thanks again!

[Rhys]

Hi again Davey,

In that case there is (I think) one issue you need to consider above all other: who you sell to.

If you sell predominantly to businesses most (almost all) of these will be GST registered so will reclaim the GST you charge them - so they don't care if you charge them $100 GST free or $110 GST inc, to them the cost of either is $100. Deregistering will save you a bit in accounting fees - although once again take a look at the advice profived by taxpert - but then you lose a bit because you can't claim the GST on your phone bill, petrol, etc. Probably worth doing, but marginal.

If on the other hand you sell to individual consumers deregistering for GST adds an immediate 10% to your income. This is because your customers only see the price on the procuct they don't get to reclaim the GST. Say you sell an item (now) for $110 including $10 of GST, once you deregister for GST you should still be able to sell the item for $110 but now all of that is revenue to you. You no longer get to cliam back the GST you are currently reclaiming on purchases but this (has to be) tiny in comparison.

Hope this makes sense, cheers, Rhys