Tax basics for small business

GST summary

Below is a brief summary of how GST will affect your business.

You are registered for GST (or required to be registered)	You are not registered for GST (and not required to be registered)
Collect GST on taxable sales.	Do not collect GST.
Invoices you issue must include specific information to be called 'tax invoices'.	Your invoices must not be called 'tax invoices'.
Claim GST credits on your activity statement.	Do not claim GST credits.
Your income tax deduction excludes GST.	Your income tax deduction is the full cost, including GST.
	Keep an eye on GST turnover. If your current or projected GST turnover is $75,000 or more, you must register within 21 days of realising this.

For more information, refer to: GST for small business (NAT 3014) GST and the disposal of capital assets (NAT 7682).

Example

Alex - All Electrical (sole trader)
Alex operates a business that is registered for GST and has quarterly tax periods. In his first quarter, Alex makes taxable sales of $2,200, buys stock costing $880 and has phone expenses of $44. For each of these things, he can work out the GST part by simply dividing the total amount by 11.

Alex works out GST for his first activity statement as follows:

GST collected on sales ($2,200 ÷ 11)		$200
Less GST credits:
stock ($880 ÷ 11)	$80
expenses ($44 ÷ 11)	$4	$84
Net GST to pay ($200 - $84)		$116

Sections within How GST works

• GST credits
• GST sales and purchases
• Special GST rules
• Tax invoices
• Reporting GST
• GST summary