Do I need to register for GST? The $75,000 rule
When Australian sole traders and tradies must register for GST, how GST turnover is worked out (current and projected), the 21-day deadline, optional registration, and what changes once you're registered.
Having an ABN doesn't mean you're registered for GST. They're separate registrations. Lots of sole traders have an ABN and aren't registered for GST, and that's fine until their turnover crosses the threshold. Here's how the ATO says it works.
When you must register
The ATO says you must register for GST when:
- your business has a GST turnover of $75,000 or more (the GST threshold)
- you start a new business and expect to reach $75,000 in your first year
- you provide taxi, limousine or ride-sourcing travel, whatever your turnover
- you want to claim fuel tax credits.
Non-profit organisations have a $150,000 threshold. You need an ABN before you can register.
What "GST turnover" means
GST turnover is your total business income, not your profit. That's the mistake that catches tradies out. Materials you pass on to customers still count. From total income you take out GST included in your sales, input-taxed sales, sales not connected with your business, certain non-taxable sales to associates, and sales not connected with Australia.
Current and projected turnover
You reach the threshold if either of these is $75,000 or more:
- Current GST turnover: this month plus the previous 11 months.
- Projected GST turnover: this month plus the next 11 months (what you're likely to earn).
When working out projected turnover, leave out sales of capital assets (like selling your ute or a welder) and sales made only because you're closing or substantially shrinking the business. If your current turnover is over the threshold but the ATO is satisfied your projected turnover will be under it, you don't have to register.
Worked example (made-up figures)
A sole-trader welder invoices about $5,500 a month. Over the last 12 months that's $66,000, under the threshold. Then they win a 6-month fabrication contract worth $4,000 a month on top of their usual work. Their projected turnover for the next 12 months is now about $66,000 + $24,000 = $90,000. They've reached the threshold on a projected basis, so the 21-day clock to register starts now, not when the 12-month total finally passes $75,000.
The 21-day deadline
Once you're required to register, you have 21 days. The ATO says to check every month whether you've reached, or are likely to reach, the threshold.
If you don't register when you should
The ATO may make you pay GST on sales made since the date you were required to register, even though you didn't add GST to those prices. Penalties and interest may also apply. In practice that GST may come out of your own pocket, because you may not be able to go back and bill customers for it. Registration can be backdated, but the ATO limits that to 4 years unless there's fraud or evasion.
Registering voluntarily
Under $75,000, registration is optional. If you choose to register, the ATO says you generally must stay registered for at least 12 months. Some reasons tradies register early:
- You can claim GST credits on tools, materials, fuel and the ute.
- Builders and commercial clients who are registered can claim back the GST you charge, so it doesn't cost them anything.
And reasons not to:
- Mostly homeowner customers can't claim GST back, so your price goes up 10% for them, or your margin drops.
- You take on BAS lodgement and the record-keeping that comes with it.
What changes once you're registered
- Add 10% GST to taxable sales, and say clearly whether prices are ex or inc GST (see quoting with GST).
- Issue a tax invoice when asked, within 28 days, for sales over $82.50 inc GST (see tax invoice requirements).
- Lodge a BAS. Most small businesses report GST using Simpler BAS: G1, 1A and 1B (see Simpler BAS explained).
- Claim GST credits on business purchases, keeping tax invoices for anything over $82.50.
Not registered? Don't charge GST
If you're not registered, don't add GST to your quotes or invoices, and don't call your invoice a tax invoice. Your customers can check your status on ABN Lookup.
How to register
Once you have an ABN, register through Online services for business, by phoning the ATO's business enquiries line, or through a registered tax or BAS agent. The ATO will confirm your effective date of registration in writing.
Free tools (they run in your browser):
GST & BAS Quick Calculator – add or remove GST, estimate G1, 1A and 1B for a Simpler BAS, and check the $75,000 registration threshold
Tradie Charge-Out Rate Calculator – work out the hourly and day rate that covers your wage, super, overheads and unbillable hours, plus profit, with or without GST.
Sources
Related guides
- Simpler BAS: what goes in G1, 1A and 1B
- How to quote a job with GST (Australia)
- What a tax invoice must show (Australia)
General information only, summarised from the official sources above as at the review date. It isn't legal, tax, WHS or engineering advice. Rules change and your situation may differ, so check the source or ask a professional.