The Australian Goods and Services Tax system has been in place for over 20 years. Initially, it was a massive learning curve for small businesses but as time has passed some of the basic rules have slipped.
All businesses in Australia must register for an ABN (Australian Business Number). Then if the enterprise exceeds, or expects to exceed, business income over $75,000 in a 12-month period they must also apply to be registered for GST. For a non-profit organisation the threshold is $150,000.
If you don't register for GST when required, the ATO may make you pay GST on past sales from the point you should have registered, even if you didn't include GST in the price, as well as penalties and interest.
Many think the 12-month test is over the tax year (July to June) but it is not. If your income in the current month and that of the previous 11 months or your income in the current month and your projected income in the coming 11 months exceeds the threshold you are required to be registered for GST from that month. Certain types of income are excluded from the test such as the sale of a business asset. With the current high price on cattle sales at the moment, it pays to review your position.
If registered for GST you are required to include GST in the price of all business supplies unless that supply is exempt. GST-free supplies include items such as food, some education courses, medical, health and care services, childcare services, water and sewerage, and the list goes on.
The tax office has an exhaustive list of what it considers food. Excluded from this list are live animals. So when livestock is sold to the meatworks GST must be included. After the animal is killed and sold to the butcher shop the meat is considered to be food and that supply will not have GST. Don't assume that everything you sell has GST as a side crop of pumpkins would be GST-free. The same item purchased from a supermarket and taken home could be treated differently if purchased at a café and eaten there. This area of the GST law is quite complex so it pays to check.
- Helen Warnock is a partner in a Central Queensland Chartered Accountant firm. This article offers general information only. You should consult your own advisor to seek advice relevant to your personal circumstances before taking action.