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Back to basics for your small business accounting

back to basics

Whilst many of our blogs here at MAS accountants are geared towards small businesses, today I thought we'd get back to basics and give a few quick explanations of the GST system for small businesses.

To start off anyone, or any entity, that carries on a business must register for an ABN number; note that this is not the same as registering for GST. An ABN is just a unique number that allows businesses to interact on an official level.

Anyone that carries on a business and has gross total income or sales greater than $75,000.00 must register for GST. For some businesses with turnover less than this threshold, GST registration is optional. It can sometimes benefit a business to register even when they don't have to. The only way to work this out is to discuss your business plans with a small business accountant. Once you've determined if you need or want to register for GST there are several other decisions to be made.

A business can elect to register for GST reporting on a monthly or quarterly basis. Only large businesses with gross sales above $20 million need to report and pay GST monthly. Most businesses will want to report GST on a quarterly basis to ease the compliance costs of either preparing themselves or paying an accountant to prepare BAS forms.

When reporting GST this can be done based on one of two methods. Accrual basis accounting requires you to report all transactions of sales and purchases whether or not they are physically paid, this means you may end up paying GST to the ATO on sales you are yet to even receive. Cash basis accounting requires that you only report sales and purchases that have been physically received and paid. This will in most cases be the preferred method of GST reporting for most small businesses.

Note that there will always be exceptions to the norm, such as medical service providers who don't collect GST on income and are therefore entitled to claim back GST credits on purchases.

For more information on registering for GST, why not get in touch with MAS accountants, servicing small business across Sydney and Melbourne for over fifty years.

 
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