GST for Sole Traders: Register, Price and Report

Where your turnover stands

Multiply your average price by the jobs you do in a year and you have a first estimate of GST turnover: $450 × 150 jobs = $67 500, under the $75 000 line. Keep two refinements in mind. Turnover is tested monthly on the last twelve months and on the next twelve, so a big contract signed today counts now. And not yet registered, you count the full price you receive, because no GST is included in it; business.gov.au gives the example of an online store with $80 000 of sales and $40 000 of profit that must register. The GST registration threshold page explains which sales count and which do not.

Add 10% or absorb it: who your clients are decides

Business clients (builders, agencies, other sole traders who are registered) claim your GST back as a credit. Adding 10% is neutral for them: they compare your ex GST price with your competitors'. Registering can even make you look more established, and some larger clients only deal with registered suppliers.

Household clients pay the GST and keep it. Adding 10% is a price rise of ten per cent. If the market will not bear it, you absorb the GST: your shelf price stays at $450, of which $40.91 is GST, and your revenue per job falls to $409.09. The credits on your costs ($6.00 per job here) soften the blow but rarely cancel it, unless your costs are a large part of your price.

A graphic designer quoting $4 000 with $2 750 of printing included is the case where credits matter: absorbing GST costs $363.64 but returns $250.00 of credits, so the net cost of being registered is $113.64 on that job.

A quarter as a registered sole trader

Forty jobs at $495.00 including GST, with $66.00 of materials each, gives a quarter with $1 800.00 of GST on sales, $240.00 of credits and $1 560.00 to pay with the BAS. Set aside one-eleventh of every payment you receive in a separate account and the quarterly bill is never a surprise. The BAS and GST credits simulator handles private use and gives the due date.

Voluntary registration: when it pays

Section 23-10 lets you register below the threshold. It tends to pay when most clients are registered businesses, when you are about to buy expensive equipment (a $22 000 vehicle used only for the business carries $2 000 of GST you would recover), or when you export services GST-free and would otherwise lose the GST on your costs. It tends to cost when you sell to households in a price-sensitive market. A voluntarily registered sole trader who is not required to be registered may choose annual GST reporting under Division 151, which reduces the paperwork to one GST return a year.

The paperwork that comes with it

• ABN first. GST registration is attached to your ABN; you can register online through the ATO's services or through a registered tax or BAS agent.
• Tax invoices. Registered clients need one to claim their credit. It shows your ABN, the date, what you supplied and the GST (or that the price includes GST).
• BAS. Quarterly for most sole traders. Business.gov.au notes that sole traders can lodge it through myGov linked to the ATO.
• Records. Keep tax invoices for purchases over $82.50 including GST; below that, receipts do.

One thing does not change: income tax. Your business profit still goes in your individual tax return. To see what a given profit leaves you after income tax and the Medicare levy, use the income tax calculator.