Home – New Forums Money matters Register for GST when selling GST free products?

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  • #979142
    Dad_of_Arlo
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    Hi guys,

    I’m just kicking off a new coffee roasting business and have hit the GST question. We’re just starting off and dont plan on hitting 75k in the first year, and I’m a sole trader.

    Coffee does not incur the GST, so I will not be charging that to my customers however I can’t decide if it is in my best interest to register for GST. All my purchases (machinery, office gear, packaging etc) have it included, would it be best to register and claim that GST paid back, or is it best to keep it as it is? Because I pay it but don’t charge it, I cant figure out the best option, as many has said before, GST confuses me! I’ve seen examples of people who are under the 75k threshold who really lose out because they are registered, not ideal at all!

    I hope someone is able to give a little advice on which way to go, thank you in advance for your help!

    Many thanks again,
    Matthew

    #1112304
    MyGreatIdea
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    If the majority of your sales are GST free then I would think registering for GST now would be a good idea.

    I can’t understand how anyone can “lose out” by registering, since the GST is never your money anyway. Unless they don’t simply add the GST to their current pricing and absorb it instead? But that’s just a poor decision, not a consequence of registering.

    Wendy :)

    #1112305
    ntgd
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    Generally you would receive more benefit if you are registered for GST.

    As for any business expenses your real benefit is a % depending on the tax rate.

    So using a company for example and the company tax rate is 30%

    If you incurred a $110 cost to buy the coffee and you are not register for GST then the full $110 will be your business expenses and the real benefit is a reduction in income tax of $33 ($110 x 30%)

    For the same $110, if you are registered for GST, then you first get the GST back which is $10, and your expenses deduction will then be $100, which give you a reduction in income tax of $30. So you are getting the GST refund of $10 plus the tax reduction of $30 which means your total benefit is $40.

    Your expenses is still $110 to your supplier but you get more benefit if you are registered for GST.

    Of course by registering for GST you will need to submit BAS statements every quarter, so it will be more paperwork for you to prepare and make sure they are lodge on time. This is not too bad as it also make you at least prepare your account on a quarterly basis which will help you be more active in preparing your financial records instead waiting till the end of the financial year.

    #1112306
    Divert To Mobile
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    Could one or some of the accountants please verify if this is allowed?

    New venture – registers for GST
    purchases all equipment and claims the gst component in first qtr.
    Next qtr deregisters GST
    Continues business < $75k p.a. Steve

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