GST for tradies: the basics in plain English

GST confuses plenty of tradies, especially in the first year or two on your own. This is a plain English overview of the basics. It is general information, not tax advice. Your situation might be different, so check the ATO links at the bottom or talk to your accountant.

When you have to register

The ATO says you must register for GST when your GST turnover is $75,000 or more. That turnover is worked out over the current month plus the previous 11 months, or what you expect over the current month and the next 11 months. For non profit organisations the threshold is $150,000.

Once you hit the threshold, the ATO says you have 21 days to register. Keep an eye on your turnover as you grow, because a few good months can push you over sooner than you expect.

You can also choose to register below the threshold. Some tradies do, especially if they mostly work for other businesses who can claim the GST back. Your accountant can tell you if it makes sense for you.

What registering means day to day

Once you are registered:

• You add GST to the price of most of your work and pay that GST to the ATO.
• You can generally claim back the GST included in what you buy for the business, like materials, fuel and tools. These are called GST credits.
• You lodge a Business Activity Statement (BAS), usually quarterly, to report both.

Showing GST on your quotes

Be clear every time. Either show the price plus GST, or the price including GST, never leave it to guesswork. The cleanest way is three lines at the bottom: Subtotal, GST, Total.

If you are not registered for GST, do not charge it. Showing "No GST" or simply not adding any is fine. Charging GST when you are not registered is not allowed.

Tax invoices

If you are registered and a customer asks for a tax invoice, the ATO says you must provide one within 28 days (with an exception for small sales of $82.50 or less). In practice, just make every invoice a proper tax invoice from the start.

The ATO says a tax invoice for a sale under $1,000 should show:

• That it is a tax invoice
• Your identity (your business name)
• Your ABN
• The date it was issued
• A brief description of what was sold, with quantity and price
• The GST amount, or a statement that the total includes GST
• The extent to which each item is taxable

For sales of $1,000 or more, it must also show the buyer's identity or ABN. For most tradie jobs, just put the customer's name on every invoice and you are covered.

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Claiming GST credits: keep your receipts

To claim back the GST on what you buy for the business, you need records, and for larger purchases a valid tax invoice from the supplier. The receipt from the trade counter matters. A faded docket at the bottom of the ute in September is not much use.

The easiest habit: snap a photo of every business receipt when you get it, and note what it was for. At BAS time you have everything, and you are not leaving money on the table.

GST free work

Some work is GST free. For example, the NDIS says most NDIS supports are GST free. If some of your work is GST free, make sure your invoices show it correctly. If you are not sure, ask the ATO or your accountant.

BAS time without the panic

If you are registered, you will usually lodge a BAS each quarter. It reports the GST you charged and the GST credits you are claiming. The trick is to keep it boring: record every invoice when you send it, snap every receipt when you get it, and put the GST you collect into a separate account as customers pay. Then BAS is a matter of adding up, not searching. Many tradies hand this to a bookkeeper or accountant, and good records make that cheaper too.

Common mistakes

• Quoting without saying whether GST is included, then arguing about it later
• Forgetting to register once turnover passes the threshold
• Spending the GST you collected, then being short at BAS time. Set it aside as you get paid.
• Losing receipts and missing out on credits you were entitled to

How Its All Sorted helps

Its All Sorted works out GST on every quote and invoice, added on top or included, your call, and marks GST free work properly, including NDIS. You can snap receipts as you go and Kel reads them in, so your records are ready for your accountant.