Making the GST Registration Decision
Deciding whether to register for GST is one of the most important tax decisions for small businesses. While registration is mandatory once you reach certain thresholds, many businesses can benefit from voluntary registration even before hitting those limits. This guide helps you evaluate whether GST registration is right for your business.
When Registration Is Mandatory
🇦🇺 Australia - You MUST Register If:
- Your GST turnover is $75,000 or more in a 12-month period
- You expect to exceed $75,000 in the next 12 months
- You're a taxi or ride-sharing driver (any turnover)
- Non-profit organizations: $150,000 threshold
Deadline: Within 21 days of reaching the threshold
🇳🇿 New Zealand - You MUST Register If:
- Your taxable turnover is $60,000 or more in a 12-month period
- You expect to exceed $60,000 in the next 12 months
- You provide remote services to NZ consumers (overseas businesses)
Deadline: Within 21 days of reaching the threshold
Should You Register Voluntarily Below the Threshold?
If your turnover is below $75,000 (AUS) or $60,000 (NZ), you can choose to register voluntarily. Here's how to decide:
Decision Framework
Ask yourself these key questions:
- Who are my customers?
- Mostly businesses (B2B) → Consider registering
- Mostly consumers (B2C) → Probably don't register
- Are my expenses high?
- High business expenses with GST → Register to claim credits
- Low expenses → Less benefit from registration
- How price-sensitive are my customers?
- Not price-sensitive (professional services) → Can register
- Very price-sensitive (retail) → 10-15% increase might hurt sales
- Am I growing fast?
- Rapid growth expected → Register now to avoid disruption later
- Stable/slow growth → Wait until necessary
- Can I handle the admin?
- Good with paperwork/accounting → Registration manageable
- Struggle with admin → Extra burden might not be worth it
Pros and Cons: Detailed Analysis
✅ Advantages of Registering for GST
| Advantage | Who Benefits Most | Example |
|---|---|---|
| Claim GST on expenses | Businesses with high costs | Tradie buys $10,000 tools, claims $1,000 GST back (AUS) |
| Professional credibility | B2B service providers | Consultant with ABN/GST looks more established |
| B2B advantage | Selling to registered businesses | Client can claim your GST, making your price effectively lower |
| Fuel tax credits | Vehicle-based businesses | Must be GST-registered to claim fuel tax credits |
| Easier to scale | Fast-growing startups | Systems already in place when you hit threshold |
| Cash flow benefit (sometimes) | Businesses with slow receivables | Using cash accounting, delay paying GST until customer pays |
⚠️ Disadvantages of Registering for GST
| Disadvantage | Who's Affected Most | Example |
|---|---|---|
| Price increase impact | Consumer-facing retail | Coffee shop raises prices 10% (AUS), customers may go elsewhere |
| Administrative burden | Sole traders, small businesses | BAS returns every quarter = extra paperwork/accountant fees |
| Cash flow impact | Businesses with long payment terms | Invoice $11,500, owe ATO $1,500 before customer pays |
| Record-keeping requirements | Disorganized businesses | Must keep all receipts, issue tax invoices, detailed records |
| Minimum 2-year commitment (NZ) | NZ voluntary registrants | Can't deregister for 2 years even if turnover drops |
| Accountant costs | Those without bookkeeping skills | Extra $500-1,500/year for BAS/GST return lodgment |
Scenario Analysis: Should YOU Register?
Profile:
- Annual revenue: $45,000 (below threshold)
- Clients: Mix of small businesses and individuals
- Expenses: $8,000/year (software, hardware)
Analysis:
- GST on expenses: ~$800 (AUS) or $1,200 (NZ) claimable
- Client mix means some won't care about GST, others might prefer it
- Low admin burden (quarterly BAS manageable)
Recommendation: ✅ REGISTER
Reason: Claiming $800-1,200 back on expenses is significant. Most B2B clients prefer dealing with GST-registered suppliers. Admin burden is manageable for a solo freelancer.
Profile:
- Annual revenue: $55,000 (below threshold)
- Clients: 100% individual consumers
- Expenses: $30,000/year (ingredients, supplies)
- Price sensitivity: High (competing cafes nearby)
Analysis:
- GST on expenses: ~$3,000 (AUS) or $4,500 (NZ) claimable - significant!
- But: Prices would need to increase 10-15%
- Competitors not registered = price disadvantage
Recommendation: ❌ DON'T REGISTER (yet)
Reason: While expense credits are tempting, a 10-15% price increase in a competitive consumer market could lose customers. Wait until mandatory ($75k AUS / $60k NZ). Focus on growing revenue first.
Profile:
- Annual revenue: $68,000 (just below AUS threshold)
- Growth rate: 20%/year (will hit $75k in 6 months)
- Clients: 100% businesses (B2B)
- Expenses: $15,000/year
Analysis:
- Will be forced to register soon anyway
- B2B clients expect and prefer GST invoices
- Claiming $1,500 (AUS) on expenses is a bonus
- Better to set up systems now than rush later
Recommendation: ✅ REGISTER NOW
Reason: You'll hit the threshold within months. Register now to avoid the rush, get systems in place, and claim expense credits. B2B clients won't mind—many prefer it.
Profile:
- Annual revenue: $35,000 (well below threshold)
- Clients: Individual consumers worldwide
- Expenses: $12,000/year (materials, Etsy fees, shipping)
- Admin capacity: Struggles with existing bookkeeping
Analysis:
- GST on expenses: ~$1,200 (AUS) or $1,800 (NZ) claimable
- But: Extra admin burden significant for someone already struggling
- Price increase might hurt international competitiveness
- Unlikely to hit threshold soon
Recommendation: ❌ DON'T REGISTER
Reason: Admin burden outweighs benefits. Focus on growing the business and improving bookkeeping systems first. Reconsider if revenue doubles.
Profile:
- New business, projected revenue: $25,000 first year
- Clients: Mix of homeowners and property managers/businesses
- Expenses: $18,000 (tools, vehicle, supplies)
- Plans to grow aggressively
Analysis:
- GST on expenses: ~$1,800 (AUS) or $2,700 (NZ) claimable - huge for startup!
- Professional credibility boost with business clients
- High expense-to-revenue ratio = maximum benefit from credits
- Many tradies are GST-registered, so expected in the industry
Recommendation: ✅ REGISTER
Reason: High startup costs mean massive GST credits in year 1. Industry norm is registration. Sets you up for growth. Claiming $1,800-2,700 back is critical for cash flow in early stages.
Financial Calculation: Is It Worth It?
Simple Break-Even Formula:
Annual GST on Expenses - Admin Costs = Net Benefit
Example (Australia):
- Annual business expenses: $20,000
- GST claimable: $20,000 × 0.10 = $2,000
- Accountant fees for BAS: $800/year
- Your time (4 hours/quarter × $50/hour): $800/year
- Net benefit: $2,000 - $800 - $800 = $400/year ✅ Worth it
If net benefit is positive, registration makes financial sense.
Common Mistakes to Avoid
❌ Don't Make These Errors:
- Registering without understanding obligations: BAS returns are mandatory, penalties for late filing
- Not considering cash flow: You must pay GST even if customer hasn't paid you (unless using cash accounting)
- Forgetting the 2-year rule (NZ): Voluntary registrants must stay registered 2 years minimum
- Ignoring the threshold: Mandatory registration once you hit $75k (AUS) / $60k (NZ)
- Raising prices without warning: Communicate GST changes to existing clients beforehand
Next Steps: How to Register
🇦🇺 Australia
- Get an ABN (if you don't have one)
- Register online via ATO Business Portal
- Choose accounting method (cash/accrual)
- Select reporting period (monthly/quarterly)
- Set up accounting software
🇳🇿 New Zealand
- Get an IRD number (if you don't have one)
- Register via myIR online
- Choose accounting basis (invoice/payments/hybrid)
- Select filing frequency
- Set up accounting software