Talking Cents

Ask your business accountant how the GST tax system can work for you

As the GST tax system has been in place for over ten years now it's to be hoped that all small business owners have a firm grasp on how the system works. What many may not be aware of are two aspects of the system that you can actually tailor to your own business needs. How often you report GST and choosing between cash and accrual accounting methods.

· If your projected GST related income is likely to be less than $75,000.00 for the coming financial year then you can register to lodge one annual BAS. Saving micro businesses a great deal of compliance time and cost. The threshold increases to $150,000.00 for non-profit organisations.
· The majority of small businesses will choose to lodge BAS forms on a quarterly basis, which involves reporting all GST on income and expenses every three months. Using the services of a registered tax agent entitles you to access extended lodgement deadlines.
· The final option for BAS lodgements is monthly. For businesses with gross turnover in excess of $20 million they must lodge BAS forms monthly. Businesses that have mostly GST free income such as the Medical/Pharmaceutical sectors can claim back input tax credits on a monthly basis to improve cash flow rather than waiting every three months.

The option of which accounting method to use should only be decided with your small business accountant as they will have the knowledge and best interests of your business as the basis for their decision.

Broadly speaking, using the cash basis is the preferred method for most small businesses as you only need to report and pay GST on income that you have actually received, not on debtors that may not ever be collected.

For businesses with gross income greater than $2 million then the accruals method is compulsory. There are other examples of businesses who would benefit from accruals reporting of GST but they would be limited in scope and often limited to specific periods in a business life cycle, such as times when large capital acquisitions are being made.

For more information on this matter contact us, the original accountants for small business in Sydney.