Emily Rigz

How to manage GST as a freelancer in Australia Why do freelancers have to think about GST? GST is one of the many layers of information that you will sift through when you start up a business. It’s not the most exhilarating topic ever, but either is a surprise tax bill that cripples the business you’ve created. As someone who is a sole trader and sourcing their own work, you are your own boss and responsible for paying your own tax. Making sure that you understand your obligations from the start will make business less stressful in the long run. What is GST? GST stands for Goods and Services Tax. It means that every time you buy something in Australia from a business that is registered for GST you are paying for the price of the goods or service plus an added tax of 10%. How it works The cost of GST is born by the consumer, not the business owner. Businesses add 10% of the cost of their goods or services onto the existing price and pay that extra 10% to the tax man. So, the GST has effectively turned every GST registered business owner into a small-scale tax collector. Do I have to register for GST as a freelancer? Not unless your business falls into one of these categories: • • • Your business is making a turnover of $75,000 or more You run a non-profit organisation that makes $150,000 a year or more You provide Taxi, Uber or limousine services regardless of your GST turnover Should I register for GST even if I don’t have to? First things first, it’s a good idea not to register for GST unless you understand what you need to do and how to calculate GST into your fees and expenses. If you don’t really get it, don’t register. This will ultimately turn into a tax nightmare for you come tax time. Remember that the cost of GST is born by the consumer, not the business. If you are registered for GST all you are doing with the tax money your clients pay you is passing it onto the tax man. If you aren’t registered for GST, you don’t charge or collect that extra 10% in your fee to clients. While you aren’t going to the hassle of collecting GST you are still paying GST to likely every other business you purchase from. While GST is included in the total price of things you might be able to claim as a tax deduction for your business, you can’t claim GST credits. If you do register for GST, you can claim back the GST you pay for anything that is related or partly related to your business as a GST credit (also known as an input tax credit). If you can claim more GST credits than what you collect, you can claim that amount back through your BAS. How do I calculate GST? Adding GST to your fee This is easy enough. Divide your fee by 10 and add this figure onto the price of your goods or services. Think of it like this, now that you have added another 10% on top of the full price, this new price is actually made up of 10 parts cost (100% of the cost) and 1 part GST (10% added GST). Think of it as a pie with 10 pieces that you’ve just made bigger by adding an 11th piece. Calculate how much GST is included in your expenses First you need to check that the expense included GST, it will say on your receipt. Imagine you’ve just paid $2000.00 for a new computer. The receipt says that it includes GST but doesn’t state how much the GST actually was. Think back to the pie with 11 pieces. Because the GST included in this price is the 11th “piece” of the price, to calculate how much that piece is you need to divide the total cost by 11. So, if you divide $2000.00 by 11 we can see that the GST component of your expense $181.82.