GST & Non GST

[BrightBiz]

If I have agreed on a set retainer each week of $500, the client sent back an email stating that yes, $500 per wk (inc. gst) is agreeable, the problem is that I don't actually charge GST because I am not GST Registered.

So does this mean they are expecting to be able to claim a gst portion of that $500 and I should charge a bit less do you think? Or just send through my invoice as is?

Sorry if this sounds like a daft question, I am almost considering registering for GST anyway but it will probably be a couple of years before I grow my business over $75000 so not sure it's worth the extra paperwork just yet.

Thanks everyone for your advice

[Burgo]

Regardless whether you are or are not registered for GST customers expect GST to be charged so they can claim. Your fee of $ 500.00 includes GST.

Dont worry about whether you do or dont pay GST always charge it as inclusive that way saves a lot of arguments. When you build your business up to where GST is paid then you can either add GST to your invoice or increase your fees which include GST.

There my thoughts

[The Internet Bloke]

Originally Posted by BrightBiz

Sorry if this sounds like a daft question, I am almost considering registering for GST anyway but it will probably be a couple of years before I grow my business over $75000 so not sure it's worth the extra paperwork just yet.

For a business to claim the GST component of the $500 payment, your account needs to be headed "TAX INVOICE".
If it is not, they cannot claim any GST on the payment.

If you are not registered for GST, your invoice cannot have the heading "TAX INVOICE".

So - in your situation, your invoice should just have the word "INVOICE" at the top.
If they claim GST - that's their error.
If they ask you about "Is GST Included?", then you should say that you do not charge GST.

Might be an idea to just register for GST, even though you aren't over the threshold.

Cheers, Eric G.

P.S. And if your ABN is not provided to them. they are supposed to withhold around half of the payment as tax.

[BrightBiz]

Thanks for that everyone,

I was aware that I should only send out an "Invoice" and not a "Tax Invoice", we didn't discuss whether I charge GST prior, and I was thinking they probably wrote (inc gst) because they didn't want to end up being charged $550 per week if I charged GST on top of the agreed amount.

I think I'm probably just worrying too much!! I just didn't want them to think they were really paying more than they thought they would be, although I am sure if they are concerned they can ask me when I invoice them, it's an ongoing contract so as long as I offer value for money I'm sure they won't be concerned.

It does raise the question in my mind though that most businesses probably expect other businesses to be GST registered.... something to think about...

[fiona@vas]

If I had an arrangement with a supplier for $500 including GST, I would DEFINITELY be expecting to be paying $454.55 + GST.

I'd encourage you to clarify this with the client in some way... it would be a shame for a potential long term business arrangement to go sour over a misunderstanding and it's always easier to address these issues earlier rather than later....

[FletcherTax]

I agree with Fiona. Better clarify sooner than later with your client.

They may be expecting to pay $454 and receive a GST credit for $45 versus paying $500 for your service. Should they expect you to be GST registered - perhaps you need to offer your prices as $500 + GST or would you soak up the GST and reduce your own profit margin?

I know a lot of businesses are registering for GST just to appear like 'big fish' despite the extra admin work involved.

Fletcher Tax Accountants
www.fletchertaxaccountants.com.au

[BrightBiz]

Thanks guys,

I really think I will register for GST, although it might be a little inconvenient now, but one day when the kiddies are a little older I do plan to grow my business into a more full time venture, so it will be necessary then anyways, and I'd rather appear more professional than have to worry about explaining to every new client that I'm not GST registered.

I knew I could count on getting advice here, thanks