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  • #968083
    Pesty
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    Hi everyone!

    I’m confused over GST and how it’s supposed to affect or not affect my pricing formula? I am currently NOT registered for GST and am aware that I therefore cannot charge customers GST. I buy wholesale clothing to sell via my own website and at local markets. I haven’t commenced trading yet. Can someone please tell me which way is the correct way to Price goods for a retailer who is NOT yet registered for GST?

    Is it: 1. Wholesale Unit Price + markup (100% minimum) = Retail Price?
    eg, $10 + $10 = $20 Retail OR

    2. Wholesale Unit Price + GST (at cost) + markup = Retail Price? (Would this mean that a Retailer WOULD be charging customers GST?)
    eg, $10 + $0.91 (= $10.91) + $10.91 = $21.82

    Also is freight usually worked into a Retail price or just considered a general business cost to be paid as charged?

    I want to get my pricing structure correct before I sell anything, I’m thinking things would be easier if I were to go ahead and register for GST? I’m using Cashflow Manager to keep track of income/expenses, this also helps prepare BAS’s which I know I’ll need to lodge if I register. So basically, should I be using a raw Unit Cost then markup or include the charged GST in the cost of each Item I sell? My husband thinks I should be doing the latter but I’m not so sure? The actual GST section on my Invoices is not active at present to add in GST on the Invoice Total.

    I know someone will know the answer in here, sorry I searched but couldn’t find any relevant threads.

    Thanks!
    Nicki

    #1030772
    pmcom
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    Hi Pesty,

    I’m new too about this, so please feel free for others to correct if I had misunderstood.

    If you are trading above the threshold, i think its about 80K/yr turnover, you are obliged to collect GST. The total of all GST you collect minus all GST you paid need to be paid to ATO.

    So one way to calculate your final price is to add the net wholesale price with markup then add 10% on top of it. eg: $10 (net wholesale) + $10 (markup) = $20 + GST (10%) so the final retail price would be $22

    Eventhough on above example you collect GST of $2 and possibly paid GST $1 to the wholesaler, you most likely pay GST less than $1 as there are other expenses of running your business that carries GST component too which is claimable such as, phone, internet, webhosting, etc. You can see it stated the GST amount on those bills.

    Freight is commonly calculated on top of the retail price as they mostly vary depend on distance. Offering free pickup for locals would be a good idea.

    But then again, final retail price also very depend on the business, you need to see your competitor prices to set the correct price. Too high, no one would buy your product on the other hand, too low would suffer the business profit.

    Hope this help.

    #1030773
    Pesty
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    Thanks for the reply, there’s so much to learn when you decide you want to do this. My accountant got back to me and advised not to register for now and to include the GST in the final price as it’s a buying cost and would reduce profits etc. Plus the $20,000 threshold for losses needs to be considered. So that problem’s solved, on to the next one now!

    Good luck with your new business as well!

    Nicki

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