GST Essentials for Small Business Owners
Running a small business comes with many tax obligations, and GST is often one of the most challenging to navigate. This comprehensive guide covers everything small business owners in Australia and New Zealand need to know about GST—from registration requirements to record-keeping, common mistakes, and money-saving tips.
Do You Need to Register for GST?
🇦🇺 Australia
Mandatory Registration:
- Turnover ≥ $75,000 in 12 months
- Expected to exceed $75,000 in next 12 months
- Taxi/ride-share drivers (any turnover)
- Non-profits: $150,000 threshold
Voluntary Registration:
- Below $75,000 but want to claim GST credits
- Building business credibility
- Competing with GST-registered businesses
🇳🇿 New Zealand
Mandatory Registration:
- Turnover ≥ $60,000 in 12 months
- Expected to exceed $60,000 in next 12 months
Voluntary Registration:
- Below $60,000 but want to claim GST
- Must remain registered for 2+ years
- Professional appearance for B2B clients
Step-by-Step: GST for New Small Businesses
Step 1: Determine If You Need to Register
Calculate your annual turnover:
- Add up all sales (excluding GST) for the past 12 months
- If ≥ $75,000 (AUS) or $60,000 (NZ), you must register
- If below threshold, evaluate if voluntary registration helps (see pros/cons below)
Deadline: Must register within 21 days of reaching the threshold
Step 2: Complete Your GST Registration
Australia:
- Via ATO Business Portal (requires ABN)
- Choose accounting method: Cash or Accrual
- Select reporting period: Monthly or Quarterly (most small businesses use quarterly)
New Zealand:
- Via myIR online (requires IRD number)
- Choose accounting basis: Payments, Invoice, or Hybrid
- Select filing frequency: Monthly, 2-monthly, or 6-monthly
Step 3: Set Up Your Accounting System
Essential requirements:
- Accounting software: Xero, MYOB, QuickBooks, or spreadsheets (minimum)
- Separate GST tracking: Record GST on sales and purchases separately
- Tax invoices: Template for invoices over $82.50 (AUS) or $50 (NZ)
- Receipt storage: Digital or physical system to keep all receipts
Recommended: Cloud accounting software ($10-30/month) saves time and reduces errors
Step 4: Start Charging GST
From your registration date:
- Add 10% (AUS) or 15% (NZ) to all taxable sales
- Update pricing, quotes, and invoices
- Notify existing clients of price changes
- Display GST number on invoices and quotes
Example pricing change (Australia):
Old price: $100
New price: $110 (or "$100 + GST")
Step 5: Keep Accurate Records
What to keep:
- All tax invoices you issue
- All tax invoices you receive (to claim GST credits)
- Bank statements
- Cash register tapes/receipts
- Import/export documents
How long:
- Australia: 5 years
- New Zealand: 7 years
Step 6: Lodge Your First GST Return
BAS Return (Australia) - Quarterly for most small businesses:
- Report GST collected on sales
- Report GST paid on purchases (input tax credits)
- Pay the difference (or receive refund if credits > GST collected)
- Due 28 days after quarter end (or 2 months if lodging through agent)
GST Return (New Zealand):
- Report output tax (GST on sales)
- Report input tax (GST on purchases)
- Pay the difference to IRD (or receive refund)
- Due 28th of following month (or as per your filing frequency)
Choosing Your Accounting Method
| Method | When GST Due | Best For | Cash Flow |
|---|---|---|---|
| Cash (AUS) / Payments (NZ) | When money received/paid | Small businesses, retail, tradies | Better - pay GST when you get paid |
| Accrual (AUS) / Invoice (NZ) | When invoice issued/received | Larger businesses, contract work | Worse - pay GST before customer pays |
| Hybrid (NZ only) | Payments for income, invoice for expenses | Businesses with slow-paying customers | Best of both - delay paying GST, claim credits early |
💡 Small Business Tip:
Most small businesses should use Cash/Payments accounting because it's simpler and better for cash flow—you don't have to pay GST to the tax office until your customer pays you.
What Can You Claim GST Credits On?
✅ Claimable Expenses (Input Tax Credits)
| Expense Category | Examples | GST Claimable? |
|---|---|---|
| Office supplies | Stationery, printer paper, pens | ✅ Yes |
| Equipment | Computers, tools, machinery | ✅ Yes |
| Vehicles | Work vehicle, van, ute | ✅ Yes (if used for business) |
| Rent (commercial) | Office, warehouse, shop rent | ✅ Yes |
| Advertising | Google Ads, Facebook ads, signage | ✅ Yes |
| Professional services | Accountant, lawyer, consultant | ✅ Yes |
| Stock/inventory | Goods for resale, raw materials | ✅ Yes |
| Utilities | Electricity, gas, internet (business use) | ✅ Yes (business portion) |
| Residential rent | Home rental (even if home office) | ❌ No (exempt supply) |
| Wages/salaries | Employee wages | ❌ No (no GST on wages) |
| Bank fees (some) | Account fees, merchant fees | ❌ No (financial services exempt) |
| Insurance (some) | General insurance | ❌ No (exempt in most cases) |
Common Small Business GST Mistakes
❌ Mistake 1: Not Keeping Proper Tax Invoices
Problem: Claiming GST without a valid tax invoice
Solution: Tax invoices must include:
- Supplier's name and ABN/GST number
- Date of invoice
- Description of goods/services
- GST amount or statement "Total price includes GST"
- For sales over $1,000: buyer's name/address
❌ Mistake 2: Mixing Business and Personal Expenses
Problem: Claiming GST on personal expenses, or not claiming on business use of personal items
Solution:
- Use separate bank accounts for business and personal
- For mixed-use items (car, phone), calculate business percentage
- Example: Car used 70% business → claim 70% of GST on running costs
- Keep logbooks to prove business use
❌ Mistake 3: Missing the Registration Deadline
Problem: Continuing to operate without GST after reaching threshold
Solution:
- Track your turnover monthly
- Register within 21 days of reaching $75k (AUS) / $60k (NZ)
- ATO/IRD can backdate registration and charge penalties + interest
❌ Mistake 4: Not Adjusting Prices After Registration
Problem: Absorbing GST instead of passing it on to customers
Solution:
- Inform existing customers before registration takes effect
- Update all quotes, price lists, website prices
- If you quote "$100," make it clear if that's incl. or excl. GST
❌ Mistake 5: Late BAS/GST Return Lodgment
Problem: Missing quarterly return deadlines
Solution:
- Set calendar reminders 2 weeks before due date
- Use a registered tax agent (gives you extra time)
- Lodge even if you can't pay—penalties are lower
- Set up payment plans if cash flow is tight
Money-Saving Tips for Small Businesses
💰 Tip 1: Claim Everything You're Entitled To
Many small businesses under-claim because they don't keep receipts or think items are too small.
- Keep every receipt, even for $5 items (GST adds up!)
- Use receipt scanning apps (Hubdoc, Expensify, Dext)
- Example: $10,000 in expenses = $1,000 GST refund (AUS) or $1,500 (NZ)
💰 Tip 2: Use Cash Accounting to Improve Cash Flow
If customers pay slowly, cash accounting delays your GST payment.
- Invoice customer $11,500 (incl. GST) in March
- Customer pays in May
- You don't owe GST to ATO/IRD until May (when you receive payment)
- Accrual method would require payment in March (before customer pays!)
💰 Tip 3: Time Large Purchases Strategically
If you're about to owe GST, making a large purchase before quarter-end reduces the amount due.
- Example: You owe $5,000 GST for the quarter
- Buy $11,000 equipment (incl. $1,000 GST) before quarter ends
- Net GST payable reduces to $4,000
- Warning: Only buy what you need—don't buy just for GST
💰 Tip 4: Register Voluntarily If You Have High Startup Costs
New businesses with low revenue but high expenses can get GST refunds.
- Example: First year revenue $40,000, expenses $30,000
- GST credits on expenses: $3,000 (AUS) or $4,500 (NZ)
- GST on sales: $4,000 (AUS) or $6,000 (NZ)
- Net payable: $1,000 (AUS) or $1,500 (NZ) instead of $4,000/$6,000
Recommended Tools & Resources
Accounting Software (Essential)
- Xero: $32.50/month, full-featured, bank feeds, GST tracking
- MYOB: $27/month, popular in AUS/NZ, invoicing + GST
- QuickBooks: $20/month, beginner-friendly
- Wave: Free (basic), good for micro-businesses
Receipt Management
- Hubdoc: Auto-extracts data from receipts
- Dext (Receipt Bank): Professional grade
- Expensify: Mobile receipt scanning
Professional Help
- Bookkeeper: $40-80/hour to maintain records
- Accountant: $150-300/hour for advice, $300-800/quarter for BAS
- Tax Agent: Gives you extra time to lodge returns
Checklist: Am I Compliant?
Monthly:
- ☐ All receipts filed/scanned
- ☐ Sales invoices issued
- ☐ Bank reconciliation completed
Quarterly (or per your filing frequency):
- ☐ BAS/GST return lodged on time
- ☐ GST payment made (or refund received)
- ☐ Review turnover (approaching threshold?)
Annually:
- ☐ Tax return includes GST info
- ☐ Records archived (5-7 year requirement)
- ☐ Review registration status (still need to be registered?)