Do you need to register for GST?

If you are carrying on an enterprise you are entitled to register for GST.

When your GST turnover exceeds the turnover threshold, you must register for GST.

An ‘enterprise’ includes activities done as part of an ongoing business and one-off activities that share the characteristics of a business dealing (such as running a one-off event for which you sell tickets). You can see from that definition, that the enterprise (or business) does not need to have a great level of sophistication or longevity. It simply needs to have a commercial or business characteristic of providing a product or service for a monetary or like reward.

However, an enterprise does not include activities done as a private recreational pursuit or hobby, or activities you might do without a reasonable expectation of profit or gain.

This means that private dealings among family members without an expectation of profit and dealings by hobbyists are likely to fall outside the scope of GST law.

When it comes to GST turnover, this is determined by calculating the total value of your sales excluding GST, input-taxed sales (sales where GST does not apply) and sales not connected to Australia.

There are two registration thresholds – the current turnover threshold and the projected turnover threshold. The current turnover threshold counts your GST turnover in the current month and the previous eleven months. The projected turnover threshold counts the turnover in the current month and the turnover likely to be achieved in the next eleven months. The threshold amount for both thresholds is $75,000 per annum.

It’s also important to keep in mind two additional categories of supply that are not counted.

The first category is any income made, or likely to be made, by way of the transfer of ownership of a capital asset. Capital assets are structural assets – such as factories, shops or offices – through which a business is run. If you are registered for GST, you are liable for GST if you sell a capital asset in the course of your enterprise.

Capital assets are to be distinguished from revenue assets, such as trading stock. However, the character of an asset can change from capital to revenue and vice versa depending on how it is used. For property developers, properties built for sale and the land on which they are to be built are generally treated as revenue assets and rental properties, and the land on which they are to be built are generally treated as capital assets.

The second category is any income made, or that is likely to be made, as a consequence of ceasing to carry on an enterprise or substantially reducing the size or scale of an enterprise. For instance, if you purchase vacant land as a potential development site and decide not to proceed with any development activities, you would not be required to include the proceeds of the disposal of the land in your projected turnover.

So, the short answer to whether or not you need to register for GST is to look at your development activities and your GST turnover. If you are running an enterprise and your turnover it is over $75,000 per annum, you do need to register, whereas if it’s under the threshold and/or you are not running an enterprise, you don’t.

If you would like some assistance in better understanding your GST obligations, don’t hesitate to drop us a line.

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