When Must a Small Business Register for GST?
GST registration is one of the first real tax decisions a small business faces, and it is often made by accident: someone crosses the threshold without noticing, or registers on day one without understanding what it commits them to. Here is how the test works and how to think through the choice.
Key takeaways
- You must register for GST once your GST turnover meets or exceeds the threshold the ATO sets for your type of organisation, and the threshold for non-profits is different.
- GST turnover looks at both your current turnover and your projected turnover, so you can be required to register before you actually reach the threshold.
- Some businesses, including taxi and ride-sourcing drivers, must register regardless of turnover, and registration is also needed to claim fuel tax credits.
- Voluntary registration lets you claim GST credits on purchases but means adding GST to taxable sales and lodging activity statements.
- Once registered, you issue tax invoices, charge GST on taxable sales and report through your business activity statement.
What GST actually is
The goods and services tax is a broad tax on most goods, services and other things sold or consumed in Australia. Registered businesses add it to the price of their taxable sales, collect it from customers and pass it to the ATO. In return, they can generally claim back the GST included in the price of things they buy for the business, known as GST credits or input tax credits.
Not every sale carries GST. Some are GST-free, such as most basic food and many health and education services. Others are input-taxed, such as residential rent and many financial supplies, where you don't charge GST but also generally can't claim credits for the related purchases. The current rate and the full lists are on the ATO's GST pages at ato.gov.au/businesses-and-organisations.
The turnover test, explained
Your GST turnover is your gross business income, not your profit. It excludes some things, such as GST itself, input-taxed sales, sales not connected with your business, and sales that aren't connected with Australia. The test has two parts:
- Current GST turnover looks back over the current month and the previous months making up a year.
- Projected GST turnover looks forward over the current month and the following months making up a year.
If either figure meets or exceeds the threshold, you must register. This catches businesses that are growing fast: landing a large contract early in the year can mean your projected turnover crosses the line before you have actually received the money. Once you are required to register, you have a limited time to do so, and the ATO's GST registration page sets out the deadline.
The threshold is set in the law and published by the ATO. Look it up for your type of organisation rather than relying on a number you heard years ago.
Businesses that must register regardless of turnover
Some activities require GST registration even if turnover is small. The best-known examples:
- Providing taxi or limousine travel, including ride-sourcing through an app. Each driver needs their own ABN and GST registration from the start.
- Claiming fuel tax credits, which requires GST registration.
The ATO lists the situations where registration is mandatory. If your business involves passenger transport or fuel-heavy activities, check that list before you start trading.
GST turnover is about money coming in, not money left over. A business with a slim margin can be required to register long before it feels profitable.
Should you register voluntarily?
If you are below the threshold, registration is a choice. The trade-offs depend mainly on who your customers are and how much GST you pay on your own costs.
| Your situation | Leans towards registering | Leans towards waiting |
|---|---|---|
| Customers are mostly GST-registered businesses | They can usually claim back the GST you charge, so it rarely hurts your price | Little reason to wait if your setup costs carry GST |
| Customers are mostly consumers | Only if your GST credits on costs are substantial | Adding GST may raise your effective price or cut your margin |
| Large up-front purchases (equipment, fit-out) | You can claim GST credits on those purchases once registered | Credits are lost if you are not registered when you buy |
| Admin capacity | You are comfortable with tax invoices and regular activity statements | You want to keep compliance minimal while testing an idea |
| Growth expectations | You expect to cross the threshold soon anyway | Turnover is small and likely to stay that way |
If you register voluntarily, you are generally expected to stay registered for a minimum period before cancelling. Check the ATO's rules on cancelling registration before you decide.
What changes once you are registered
- Pricing. Prices to consumers generally need to include GST. Decide whether your current prices absorb it or increase.
- Tax invoices. You issue tax invoices that meet the ATO's requirements, and you need valid tax invoices from suppliers to claim credits above certain amounts.
- Accounting method. You account for GST on a cash or accrual basis, depending on eligibility and choice.
- Reporting. You report GST on your business activity statement, usually quarterly for smaller businesses. See our BAS walkthrough.
- Cash management. The GST you collect isn't your money. Keeping it in a separate account avoids an unpleasant surprise when the activity statement is due.
A monthly turnover check you can actually keep
The turnover test only protects you if you run it. A simple routine for a growing business:
- At the end of each month, total your business sales for that month and the previous months that make up a year. That is your current GST turnover.
- Then estimate sales for the current month and the following months that make up a year, including signed contracts and regular customers. Be realistic rather than optimistic or pessimistic. That is your projected GST turnover.
- Compare both with the threshold published by the ATO for your type of organisation.
- Write the figures and the date in a note. If you are ever asked when you first needed to register, that note is your evidence.
If either figure is getting close, start preparing before you cross the line: review your pricing, set up invoicing that can show GST, and decide on a reporting cycle. Registering a little early, on a date you choose, is usually less disruptive than discovering months later that you should have registered.
How to register
You need an ABN first. You can then register for GST through the ATO's online services for business, through the Australian Business Register when applying for your ABN, or through a registered tax or BAS agent. Choose a registration date carefully, because it affects which sales you charge GST on and which purchases you can claim credits for.
Frequently asked questions
Does income from my job count towards GST turnover?
No. Salary and wages from employment are not business income and don't count. Only income from your enterprise is relevant to the GST turnover test.
What if I crossed the threshold without realising?
You may have been required to register from an earlier date and could owe GST on past sales even if you didn't charge it. Contact the ATO or a registered tax agent promptly; dealing with it early is generally better than waiting.
Can I claim GST credits for things I bought before registering?
Generally not for purchases made before your registration date, although there are limited rules for some assets. Check the ATO's guidance before registering if you have significant set-up purchases planned.
Verdict: Check your current and projected GST turnover every month once your business is growing, and register as soon as either reaches the threshold, or from day one if you drive for a ride-sourcing platform. Below the threshold, register voluntarily when most customers are businesses or your set-up costs carry significant GST; wait if you sell mainly to consumers on thin margins. When to see a registered tax agent: if you think you crossed the threshold earlier than you registered, or your sales mix GST-free, input-taxed and taxable items.