Plenty of online businesses start small. A few sales through a website, a marketplace store or a booking page can turn into a steady income faster than expected. At some point the question of GST comes up. Getting it right early saves a lot of stress later.
This guide covers when an Australian online business has to register for GST and how turnover is worked out. It also explains what changes once you are registered. The rules here come from the Australian Taxation Office and business.gov.au, and they do change, so always check the current version.
What GST is and who collects it
GST is a tax of 10% on most goods, services and other items sold or consumed in Australia. A registered business collects one eleventh of the sale price from its customers. It then pays that amount to the ATO. The business is acting as a collector, so the GST was never really its money to keep.
An online store is treated the same way as a shop on the high street. It does not matter if you sell physical products, digital downloads or services booked through your website. What matters is your GST turnover. If you hold stock in commercial storage units or ship from home, the same test applies.
The $75,000 registration threshold
The ATO says a business must register for GST once its GST turnover reaches $75,000 or more. A new business must also register if it expects to reach $75,000 in its first year. For organisations run on a not for profit basis the threshold is $150,000. Some businesses must register no matter what they earn, such as taxi and ride sourcing drivers and anyone claiming fuel tax credits.
Below the threshold, registration is optional. Some owners choose to register early because their customers are businesses that expect GST on invoices. If you register voluntarily, the ATO says you generally need to stay registered for at least 12 months. Talk it over with a registered tax agent before deciding.
How GST turnover is worked out
GST turnover is your total business income, not your profit. Some amounts are left out, including the GST in your sales, input taxed sales and sales not connected with Australia. Certain sales to associates and sales not connected with your enterprise are also excluded. This matters because a busy store can pass the threshold well before it feels profitable.
The ATO uses two measures. Current GST turnover is the total for the current month plus the previous 11 months. Projected GST turnover is the total for the current month plus the next 11 months. You generally need to register if either figure reaches the threshold. The ATO says you may not need to if your current turnover is over but your projected turnover is clearly below it.
Projected turnover is the one online sellers tend to miss. A strong campaign, a product that takes off or a big holiday season can push your next 12 months over $75,000. Good digital marketing tactics can lift sales quickly, so check your numbers each month rather than once a year. Proceeds from selling business assets such as equipment are left out of projected turnover.
The 21 day deadline
Once you are required to register, you have 21 days to do it. You need an Australian Business Number first. You can register through Online services for business, by phone or through a registered tax or BAS agent. The ATO will confirm your registration details and the date it takes effect in writing.
Missing the deadline can be expensive. According to the ATO, you may have to pay GST on sales made since the date you should have registered. That applies even if you never charged your customers GST on those sales. Penalties and interest may also apply, which is why the ATO guide to registering for GST is worth reading in full.
What changes once you are registered
Registration brings a few new jobs. Business.gov.au says registered businesses must include GST in the price of most goods and services they sell. This is true even if you registered voluntarily. If you are not registered, you do not include GST and you should say so on your invoices.
For an online store the price change is the part customers see. Check that product pages, cart totals and checkout emails show prices that include GST. Shopping platforms and payment plugins usually have tax settings that need switching on. A quick test order will show whether the totals look right.
Business activity statements
Registered businesses lodge business activity statements, often called a BAS. Each one reports your total sales, the GST on those sales and the GST credits you are claiming. Small businesses with an aggregated turnover under $10 million may be able to use simpler options. These include accounting for GST on a cash basis and paying quarterly instalments.
Claiming GST credits
Once registered, you can generally claim back the GST included in the price of business purchases. Business.gov.au uses the example of a $1,100 computer, where the GST is $100. If your credits are higher than the GST you collected for a period, you may receive a refund. Website hosting, software and stock are common business purchases for online sellers, so keep every receipt.
Your website costs are a good example. Hosting plans, domain renewals and paid plugins all add up over a year. If you are weighing up VPS hosting for your website, ask the provider for a proper tax invoice. You will need it to support your claim.
Tax invoices for online sales
The ATO says that if a customer asks for a tax invoice, you must give one within 28 days. This does not apply to sales of $82.50 or less including GST. Many online stores send a tax invoice automatically with each order confirmation. That saves time and covers you when business buyers need one.
The details required depend on the sale amount. Lower value sales need slightly less information. A tax invoice for a sale under $1,000 must show these details:
- that the document is intended to be a tax invoice
- your identity and your ABN
- the date it was issued
- a brief description of the items sold, including quantity where relevant, and the price
- the GST amount, or a statement that the total price includes GST
- the extent to which each sale is taxable
For sales of $1,000 or more, the invoice must also show the buyer’s identity or ABN. The ATO page on tax invoices sets out these requirements in detail. Most invoicing and shopping cart software can be set up to include every field. Check one of your own invoices against the list before you rely on the template.
Keeping your website and records in step
GST registration touches more than your accounts. Your terms of sale, invoices and checkout pages should all match your registration status. If prices on your website change to include GST, update any ads and product feeds at the same time. Mismatched prices can confuse buyers and create problems with search listings, one of several SEO mistakes that can damage your ranking.
Keep a simple monthly habit. Add up the last 11 months plus the current month, then estimate the next 12 months. If either figure is near $75,000, speak with your accountant or tax agent straight away. It is far easier to register on time than to fix a late registration.
Frequently asked questions
Do I need to register for GST if I only sell online?
Yes, if your GST turnover reaches $75,000 or more. The same rules apply to online and physical stores. Selling through your own website or a marketplace makes no difference to the threshold.
Is GST turnover the same as profit?
No. GST turnover is based on your total business income, with some amounts excluded. Your expenses are not taken away. A business can pass the threshold while still making a small profit.
What if I registered late?
You may have to pay GST on sales made since the date you should have registered. Penalties and interest may also apply. The ATO allows registrations to be backdated, generally up to four years, so speak with a tax agent about your options.
Can I register for GST before I reach the threshold?
Yes. Registration is optional below $75,000 for most businesses. If you register voluntarily, you generally need to stay registered for at least 12 months and include GST in your prices.
This article is general information only and is based on ATO and business.gov.au guidance at the time of writing. Tax rules change and every business is different. Speak with a registered tax agent or accountant about your own situation.
