In the world of Australian taxes, the Goods and Services Tax (GST) is a big deal. But to calculate GST for your business may not be a daunting task.
It started back in 2000 and has become an important part of how the country collects money. This tax system has helped Australia grow and build things like roads and schools.
In this article, we’ll break down how to figure out GST in an easy way. Learning this can be helpful for individuals and businesses, making it easier to handle their finances in Australia.
What Is GST (or VAT) In Australia?
What makes GST in Australia particularly intriguing are its inherent advantages.
This taxation system is celebrated for its equitable approach, mirroring the principles of VAT, as it is levied at multiple stages of the production and distribution process.
For consumers, this translates into a refreshingly transparent tax structure, with the GST delineated on receipts for all to see.
However, one of the most significant merits lies in its ability to broaden the tax base.
GST is a tax that businesses have to pay on the stuff they sell or the services they offer. So, if a business makes $75,000 or more (or $150,000 or more for non-profits), they’ve got to pay GST. Oh, and if they offer taxi rides, they’ve got to pay for it too.
In essence, while GST shares conceptual similarities with VAT, Australia has adeptly tailored it to meet its distinct requirements, solidifying its status as a highly advantageous tax collection method for the nation.
GST Rates In Australia
GST Rates (2000-2020) In Australia
(source: Wikipedia)
Australia introduced the Goods and Services Tax (GST) in the year 2000, and it’s had its fair share of ups and downs since then. When it first came into play, the GST rate was a steady 10%, giving the government a dependable source of income for over a decade.
But in 2010, there was a twist in the tale.
The government decided to bump up the rate to 11% for a little while.
Why?
Well, it was to help out with flood relief efforts in Queensland and Victoria. Luckily, this change didn’t stick around for long, and after a year, the rate went back to its trusty 10%.
Now that you know what GST is and what are the rates, let’s see how you can calculate GST for your business. You can find online tools to calculate GST which makes the process easy, however, it’s good to know the workings behind it for any serious business.
How To Calculate GST For Your Business?
Calculating the Australian GST is pretty straightforward. If you’re selling stuff or offering services in Australia, here’s what you do: just take the base price of your stuff or service, and then add 10% to it. That’s the GST, and you include it in your final sales price or on your invoice.
Easy-peasy!
If you’re figuring out GST, here’s a simple formula to use: Take your base price and multiply it by 1.1. That’ll give you the total cost with GST included. It’s as easy as that!
Calculate GST Payable
Usually, when you’re buying or selling a property, you pay GST, which is one-eleventh of the total sale price.
Now, if you’re using something called the “margin scheme,” the amount of GST you pay is one-eleventh of the profit you make on the property. You can make these calculations a lot easier by using the GST property decision tool.
Here’s a good example to explain further:
Many folks think you can just subtract 10% from a price that already has the GST (Goods and Services Tax) included to get the price without GST, but that’s not quite right.
What you should do is divide the price by 11 to find the GST, and then multiply that GST by 10 to find the price without GST.
For example, let’s say you have a $100 item, and you want to figure out how much of that is GST and what the price would be without GST. Here’s how you do it:
- Take $100 and divide it by 11. That gives you $9.09, which is the GST amount.
- To find the price without GST, multiply the $9.09 by 10. That gives you $90.91.
- So, the price without GST is $90.91, and the GST amount is $9.09.
Calculate GST Credits
First of all, what are GST credits?
GST credits in Australia are like tax refunds for businesses. When they buy things and pay GST on them, they can get that GST money back as a credit. It helps them lower their overall GST payments.
Now how can a business calculate GST credits?
If you’re running a business and you buy stuff that has GST included in the price, you can get some of that GST money back. It’s like a refund, and it’s called a GST credit or an input tax credit. But there are a few rules:
- You have to be registered for GST.
- You can claim GST credits if you’re using the stuff you bought for your business and not for things that don’t have GST.
- The price you paid should have GST in it.
- You need a proper receipt (called a tax invoice) from the person or company you bought the stuff from, but only if you spent more than A$82.50.
One more thing, make sure the people you buy stuff from are also registered for GST. You can check if they are on the ABN Lookup website. And remember, you’ve got FOUR YEARS to claim these GST credits.
Conclusion
In a nutshell, calculating GST in Australia isn’t rocket science. Whether you’re running a business or just curious, understanding how it works is simpler than you might think. It’s all about adding 10% to the base price of your stuff or service – that’s your GST.
Now, when it comes to property, things get a bit different. You might need to use the “margin scheme” or a handy tool for property calculations. Remember, it’s not about subtracting 10% but dividing by 11 and then multiplying by 10 to get the price without GST.
As for the future of GST in Australia, it’s looking promising. It’s likely to continue supporting Australia’s growth and development for years to come. So, keep those calculators handy, and embrace the GST journey with optimism!
Staying informed about GST regulations will not only ensure financial stability but also contribute to the economic well-being of Australia. To keep getting informative updates, you can refer to ProfitBooks blogs, where we publish daily. If you’re looking for accounting software popular in Australia, with complex capabilities that we undertake using ProfitBooks‘ easy-to-use software, then create a FREE account now!
Also Read:
What Is VAT or GST In Australia?
CGT vs GST: How Do They Differ In Australia?
