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  • #966674
    Pesty
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    I’m not expecting to go into business and make over $75k in my first year, but what about all the GST I’ll pay as part of my running expenses? Do I just say goodbye to that? Won’t customers be expecting to see GST on their invoices as well? Should a business register for GST even if they’re not likely to crack $75k? What are the pros and cons of registering or not registering? Not sure what’s the best option?

    Thanks?

    Nicki

    #1020058
    Burgo
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    Personally I would register for GST even if I didnt expect to reach $ 75,000.
    You are being charged GST so you should charge GST.
    When you add all your income and all your expenses take one from the other what ever is left is either a profit or a loss. Which ever way it goes you take 1/11th of this and it is either what you pay the tax man or what you can claim from the tax man.

    It gives you a good idea if you were to do it on a quarterly basis just how well your business is going.

    That my opinion anyhow.

    #1020059
    Dardee
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    Take the following example.

    An expense of $1100 including GST (ie GST $100).

    If registered for GST:
    Expense $1000 (you claim as a tax deduction. You will effectively get your marginal rate back)
    GST $100 (you put on your BAS as an input tax credit. You get 100% back)

    If not registered for GST:
    Expense $1100 (you claim as a tax deduction. You will effectively get your marginal rate back)

    Say your marginal rate was 20%. You would get $20 back out of the $100. (you have reduced your tax by $20 due to the extra $100 tax deduction).

    The net benefit of being registered is therefore $100-$20 = $80

    From that perspective (lets call it the tax perspective) its much better to be registered as it costs you less in the long run. BUT, how much time, and/or what other costs will be incurred to do a BAS each year/qaurter/month (depending on your circumstances)? The time and other expenses may outweigh the tax benefit.

    Note that the higher your marginal rate the less the benefit of being registered becomes. If say your marginal rate was 50% then the net benefit would be $50 in the above example, rather than $80.

    #1020060
    FletcherTax
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    Nicki,

    Pro’s – appear like a bigger fish than you may be
    Con’s – more paperwork! If you are keeping track of income and expenses as is – then GST shouldn’t be too much extra resource in terms of your time. But, charges will come in from a bookkeeper or an accountant when it comes to checking and lodging your Business Activity Statement (fancy term by the ATO for the data gatherer document), whether by quarter or year. OR you can go down the independent route and lodge your BAS’s yourself (FREE). If the latter – I would advise you learn more on how GST and BAS’s work before going down this path.

    Happy to help if you have any more queries on this,

    Janna

    #1020061
    Pesty
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    Yes, some good advice there from all 3 of you, Dardee thanks for explaining it hypothetically and Janna as well. Yes the ‘bigger fish’ perception appeals to me, extra paperwork is fine because I’m already doing the bookkeeping and BAS prep for our Pest Control Business! We get our account to check each BAS and so far they have concurred with my results, we use Cashflow Manager and they said I’ve been doing a great job on it. At present my marginal tax rate is quite low as I only have taxable income from our investment property and distributions from the Trust which holds our business. My own ‘New’ business is toatally separate to the existing one. So when I get the ABN approved, I think I will opt in for GST, I don’t really know how to do accounting properly without GST actually! Although I will need to charge for GST, I’ll be setting my own prices anyway, so will just factor that in as well.

    Nicki

    #1020062
    Army of One
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    In addition to completing your bookkeeping for GST / BAS reporting purposes, have you thought of using that information (from Cash Flow Manager) for other things:

    – Managing your business through financial KPIs (key performance indicators)
    – Projections (cash flow etc)
    – Assist in obtaining finance

    The majority of small businesses do not take full advantage of the data they have sitting inside their bookkeeping software.

    What I think you should do (maybe not immediately but in the future) is ask your accountant to spend 30 minutes and actually LOOK at your reports – and ask him for any feedback in terms of profitability or if he/she has any recommendations for you to either monitor your business better or any ideas to make more money. Get your accountant to explain the lingo and even ask for a recommendation for what reports you should be looking at.

    I have no idea what type of business you have or whether looking at the financial side of things will be beneficial.

    Kris

    #1020063
    seb
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    I would, and there are some great software tools available out there to take the pain away from managing your BAS. Though to be honest, I think a well prepared xl spreadsheet is the way to go for small businesses

    #1020064
    Pesty
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    Yes Seb, I’ve decided to definitely register for GST. Problem is, how do I ammend that now that I’ve already sent my application through? Do I have to wait until I get approved and then change it or can I change it on my application before then? Does anyone know if you can claim GST incurred prior to registration? I think I might give the ATO a call.

    Cheere,
    Nicki

    #1020065
    Army of One
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    Pesty, post: 23939 wrote:
    I think I might give the ATO a call.

    Famous last words….

    Just wait until the ABN is issued, then get your digital certificate for the business portal where you can update your registration details to add GST (back dated if necessary).

    Did you file my previous response about using your bookkeeping software for more than doing your BAS in the ‘too hard basket’? ;)

    Kris

    #1020066
    Brad
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    Getting your ABN should be instant via the ATO website. Why are people stating timeframes in weeks? Is that what happens when you are a sole trader and need to register the business name (so you can get the ABN as a ‘trading as’ thing?) as well as get an ABN?

    I have two ABNs – one for myself as a sole trader and registered in my name (rather than a Trading As), and the other for my Pty Ltd entity. I received both pretty much instantly. The first through ATO’s website when registering, the second via the online incorporator services (in my case incorporator.com.au I think) that I used to register my Pty Ltd.

    “Weeks” for an ABN should only occur in edge cases I would think, or where you’re submitting paper to the ATO or ASIC.

    As to registering for GST, big benefits are (IANAA*, YMMV etc)

    1. Never pay GST! (actually claim it all back on BAS)
    2. Register for GST voluntarily (<75k/yr turnover) thus only have to do a yearly BAS. Do all paperwork anyway but only submit when you must (i.e. when you break the 75k part in the financial year). Keep all GST to that point in your bank account earning you interest :) If you register because you must (i.e. you state you will make more than 75k), you get to keep it for 3 months. Unless you’re earning millions in which case, maybe you’re looking for http://www.flyingairbusses.com.au not flyingsolo.com.au.
    3. Lots of companies expect to be charged GST. It’s unusual not to. It’s like having your own domain for company email rather than gmail.com or hotmail.com, one more tool to make you look big and established rather than small and running out of a garage.

    *I Am Not An Accountant. This is not accounting advice. I could be (and often am) wrong. Etc :)

    #1020067
    Army of One
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    Yeah – the ATO gives themselves 28 days to issue an ABN.

    They used to always be given almost instantly for Sole Traders and Companies – but I have noticed recently that it can take up to a week even though all the details provided are exactly the same as the info the ATO already has.

    I know that in the case of companies the ATO gets a ‘data feed’ from ASIC which is updated every 12 hours (I was told this from an ATO staff member in the registrations area).

    If you enter a trading as / business name during the ABN registration application it is not the same as registering a business name (which you have to pay for). A business name is registered through the various State government departments.

    If you really want to protect your business name you can also trademark it via ipaustralia.gov.au

    #1020068
    Pesty
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    No Kris, I didn’t file it there, sorry I hadn’t referred to your advice earlier. I had a bit of a look through the program to see what you were talking aboutl I’ll have a better look today if I get the time. The bay has had me up from 4am, the 3 and 6 yr olds should be up soon, aagh!

    #1020069
    Pesty
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    When I rang to see if my application had been received, they said it had gone to ‘processing’. Maybe I should have just straight up applied for a brand new ABN rather than having the old, previously unused one reactivated? My accountant is still on holidays til the end of the month, so they said when I dropped our BAS in yesterday (we also have our own pest control biz separate to my new biz). My original ABN was issued instantly, I have been told that towards the end of last year, the wait was up to 2 months! Once everything is up and running I’m looking to get some IP protection as well because my business name is hot! I’m lucky to get it actually, I was surprised it wasn’t taken.

    Regards,
    Nicki

    #1020070
    ray_223
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    I haven’t read every post in this thread fully … BUT ;)

    I beleive there are times when NOT registering for GST is a good thing.

    For a small traders (under 75K obviously) you sells items to the general public (who can’t claim the GST component back) which have a reasonably large markup on the cost of producing the items (i.e. you would pay far more GST then what you can claim back).

    Under this scenario you can get a definate advantage (as well as your customers getting a less expensive product) against large businesses who need to charge GST.

    #1020071
    FletcherTax
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    Nicki

    Reviving an ABN takes longer as someone manually checks your application at the ATO. Not sure if they keep to their 28 standard on that.

    If you need your ABN pronto – call the ATO Registrations Department. Depending on who you get, you may be able to obtain your ABN there and then, a week earlier than the official paperwork!

    Janna

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